Gold at 2-1/2-week high, Greece euphoria wanes

Gold edged down on Wednesday from a 2-1/2-week high as concerns about Greece's ability to implement an unpopular bailout deal balanced out the gains triggered by the actual agreement, and slower factory activity in China contributed to the fall.

Spot gold rose to $1,759.84 an ounce in early trade, its highest level since February 3, before reversing course to fall 0.2 percent to $1,755.16 an ounce by 0330 GMT.

U.S. gold was little changed at $1,757.

Cash gold staged its biggest one-day rise in two weeks on Tuesday, climbing 1.5 percent along with riskier assets after euro zone finance ministers gave the greenlight to the 130-billion euro bailout for Greece.

The euphoria quickly faded, however, as worries about implementation resurfaced, and data pointing at a continuous contraction of China's massive manufacturing sector added to the gloom.

Gold has been seesawing in the range between $1,700 and $1,760 since late January, tracking Greece's torturous path to securing the bailout, while physical demand provided limited support.

"We don't see a substantial amount of enquiries in the physical market, either from the industrial or the jewellery sector," said Dick Poon, manager of precious metals at Heraeus in Hong Kong.

China's physical demand has slowed since the Lunar New Year celebrations in January, and India's demand from its jewellery sector is also declining, Poon added.

Technical analysis suggested that spot gold could break above $1,760 and trade in the range between $1,766 and $1,771 during the day, said Reuters market analyst Wang Tao.

The gains in gold prices over the past few days have triggered some scrap selling, especially from Indonesia, dealers said.

"Yesterday, the domestic prices in Indonesia were much lower than the international market, and people were taking advantage of the price disparity," said a Singapore-based dealer.

Gold bar premiums in Singapore dipped to $0.7-$1 an ounce from previously $1.20, as a result, she added.

Spot platinum pierced through the 300-day moving average and hit $1,701.5 an ounce, its highest in nearly five months, before retracing slightly to $1,696.50.

The gold-platinum spread dropped to below $60 an ounce, its lowest since late September, down from a peak near $220 in early December.

Traders said the rapid gains in platinum could be a combination of a breakthrough of a key technical resistance and ongoing worries about supply in top producer South Africa.

"Platinum cleared the previous high hit in November, so some long-positions holders could be adding to their positions," said a Tokyo-based trader, adding that industrial demand for the metal remained sluggish.