PRECIOUS-Gold near 2-month high, heads for best week in a month
* Gold up 4 percent for the week, best in a month
* Technical buying, short covering prop up prices
* Shanghai demand strong, premiums jump $3
(Updates prices) SINGAPORE, Aug 16 (Reuters) - Gold hit fresh two-month highs on Friday on strong buying from China and short covering after breaking through key technical levels, pushing the metal to its biggest weekly gain in a month. Gold edged between gains and losses in Asian hours after strong U.S. data indicated the Federal Reserve could soon start tapering its massive stimulus, but the positive momentum of the last few days sidelined sellers. The metal has gained for the last six sessions out of eight, spurring rare inflows into the top gold exchange traded fund, although the longer-term trend has been negative. "These levels are largely technically driven. They are unsustainable," said Mark Keenan, a cross-commodity research strategist at Societe Generale in Singapore. "This does not change our underlying bearish forecast and we see this as a selling opportunity. "We will get fresh QE tapering indications in the next Fed meeting in September. The tapering is likely going to start taking effect then and gold will fall again," Keenan said, referring to quantitative easing, or monetary stimulus. Spot gold hit a two-month high of $1,372.51 on Friday before paring gains to trade down 0.07 percent at $1,364.60 an ounce by 0730 GMT. It has risen about 4 percent this week. Gold was supported by technical buying once prices crossed $1,350 on Thursday, as well as some safe-haven buying on escalating tensions in Egypt. Silver gained after jumping 5 percent to a near three-month high in the previous session. Platinum and palladium were trading close to two-month highs.
FED TAPERING Despite the recent gains, the metal is down nearly 20 percent this year on fears the U.S. central bank would begin tapering its $85 billion monthly bond purchases. The Fed's next policy meeting is on Sept. 17-18. The number of Americans filing new claims for jobless benefits fell to a near six-year low last week and consumer prices rose broadly in July, which could draw the Federal Reserve closer to trimming its massive bond-buying program. Holdings of SPDR Gold Trust, the world's largest gold-backed ETF, fell on Thursday after some gains earlier in the week. Holdings are near four-year lows. Shanghai gold futures rose 2 percent on Friday. Premiums to London spot prices jumped about $3 overnight to $24, indicating strong demand.
Precious metals prices 0730 GMT
Metal Last Change Pct chg YTD pct chg Volume Spot Gold 1364.60 -0.95 -0.07 -18.51 Spot Silver 22.97 0.01 +0.04 -24.14 Spot Platinum 1521.74 0.04 +0.00 -0.86 Spot Palladium 754.22 -4.78 -0.63 8.99 COMEX GOLD DEC3 1364.20 3.30 +0.24 -18.59 37284 COMEX SILVER SEP3 23.02 0.08 +0.35 -24.06 11220 Euro/Dollar 1.3351 Dollar/Yen 97.41
COMEX gold and silver contracts show the most active months
(Reporting by A. Ananthalakshmi; Editing by Clarence Fernandez)