Gold jumps in thin volumes, but outlook remains dim

By Clara Denina

LONDON (Reuters) - Gold jumped on Thursday on physical buying after prices plunged to a six-month low, but investors remained unenthusiastic because of a brighter global economic outlook and speculation of an imminent end to the U.S. monetary stimulus.

Gold plunged 28 percent in 2013, ending a 12-year bull run, as the U.S. Federal Reserve announced plans to unwind ultra-loose monetary policy from this month by trimming its monthly asset purchases by $10 billion to $75 billion a month.

Quantitative easing has helped to drive gold prices higher in recent years, maintaining pressure on long-term interest rates and stoking inflation fears.

Price movements were still driven by low volumes in the New Year holiday week, analysts said.

"Liquidity is still very low this week and I'm not sure we can read much in today's gains ... we have to wait until next week to have a clearer picture of where we are heading to." Commerzbank commodity analyst Daniel Briesemann said.

"But as long as investment liquidation (in exchange-traded funds) continues, gold will probably stay under pressure."

Spot gold rose to a two-week high of $1,228.10 an ounce in early trading and was trading up 1.1 percent at $1,219.04 by 1118 GMT. It had dropped to its weakest since June 28 at $1,184.50 an ounce on Tuesday.

U.S. gold futures for February delivery rose as much as 2 percent in early trading.

Holdings in the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, remained unchanged at their lowest since January 2009 at 798.22 tonnes on Tuesday.

In other markets, European shares touched fresh 5-1/2 year highs on Thursday before slipping back, while the dollar rose 0.5 percent against a basket of major currencies.

Traders are likely to monitor U.S. weekly jobless claims and the Institute for Supply Management's index of national factory activity later on Thursday for indications of the strength of the U.S. recovery.

For a 24-hour gold chart analysis:

http://graphics.thomsonreuters.com/F/1/20140201095217.jpg

PHYSICAL DEMAND

Some dealers said the gold market was supported by Chinese buyers returning after the price drop.

Premiums for gold bars in Singapore were little changed from last week at $1.30 to $1.50 an ounce to the spot London prices. In Hong Kong, premiums were steady at between $1.80 and a high of $2 an ounce.

Silver rose 3.2 percent to $19.94 an ounce, while U.S. silver futures gained more than 5 percent. Silver dropped 36 percent in 2013, its worst annual performance since at least 1982.

Silver was the second-largest loser for the year on the 19-commodity Thomson Reuters/Core Commodity CRB index, preceded by corn and followed by gold.

Spot platinum was up 1.5 percent at $1,391 an ounce - it posted a 12 percent annual loss in 2013. Best-performing palladium rose 1.3 percent to $720.25 an ounce and was the only precious metal to post a positive performance in 2013, up nearly 2 percent.

(Additional reporting by Lewa Pardomuan in Singapore; Editing by David Goodman)