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PRECIOUS-Gold steady ahead of U.S. data; drop in SPDR holdings jolts market

A. Ananthalakshmi
Tuesday, 22 Oct 2013 | 2:54 AM ET

* SPDR holdings drop 10.5 T, biggest 1-day fall since July

* Traders await U.S. jobs data for stimulus clues

* Delay in stimulus reduction could support gold prices

(Updates prices) SINGAPORE, Oct 22 (Reuters) - Gold traded in a tight range on Tuesday as the market waited for U.S. economic data but investor sentiment was undermined by a big drop in holdings in the largest gold-backed exchange-traded fund. Holdings in SPDR Gold Trust fell 10.51 tonnes on Monday to 871.72 tonnes, their lowest since Feb. 2009. It was the biggest one-day fall in the fund's holdings since early July. Its holdings have fallen about 430 tonnes so far this year and this has been a big contributor to the 21 percent drop in the gold price in 2013. Flows from the fund are watched closely as they provide an insight into the thinking of investors such as U.S. hedge fund manager John Paulson who have big positions in gold. "(The) low in the ETF position mirrors a structural adjustment," said Alexis Garatti, an economist at Haitong International Research in Hong Kong. "With quantitative easing policies, excess liquidity boosted positions in gold but we will soon exit QE, which is why there is a normalisation now." Spot gold rose 0.1 percent to $1,316.90 an ounce by 0626 GMT, after ending flat in the previous session. "The drop (in SPDR holdings) doesn't bode too well for prices, especially now, when there hasn't been any U.S. data for a while," said one Hong Kong-based trader. "However, prices will be range-bound till we get nonfarm data later today. It should also get some support from talk that tapering could get delayed into next year," the trader added. Traders are looking to U.S. nonfarm payrolls data for September -- due on Tuesday after being delayed by a partial government shutdown this month -- to gauge the fate of the Federal Reserve's bond-buying stimulus programme. Some economists polled by Reuters believed the Fed could postpone the scaling-back of its $85 billion monthly bond purchases to next year as budget problems in Washington remain unresolved. Last week lawmakers reached only a temporary agreement to avert a historical debt default, raising the risk of another government shutdown early next year. Gold could see some stability for now as the delay in tapering could increase demand for gold in emerging economies, said Haitong's Garatti.

Precious metals prices 0626 GMT

Metal Last Change Pct chg YTD pct chg Volume Spot Gold 1316.90 1.76 +0.13 -21.36 Spot Silver 22.13 -0.06 -0.27 -26.92 Spot Platinum 1431.99 -0.81 -0.06 -6.71 Spot Palladium 746.72 -0.28 -0.04 7.91 COMEX GOLD DEC3 1316.90 1.10 +0.08 -21.42 10884 COMEX SILVER DEC3 22.18 -0.10 -0.46 -26.83 5528 Euro/Dollar 1.3670 Dollar/Yen 98.29

COMEX gold and silver contracts show the most active months

(Editing by Ed Davies, Muralikumar Anantharaman and Alan Raybould)