By Arpan Mukherjee Of DOW JONES NEWSWIRES WELLINGTON (Dow Jones)--Gold extended overnight gains in the Asian session Wednesday, moving in line with a stronger euro as sentiment improved following positive U.S housing data and an encouraging Spanish debt auction, but traders expect the gains to be capped ahead of the year-end holidays as many investors move to the sidelines. The yellow metal went past the 200-day moving average of around $1,622 a troy ounce early in the session, which some analysts saying this could reverse the weak technical picture. At 0522 GMT spot gold was at $1,624.70/oz, up $9.50 from its previous close. A successful Spanish debt auction overnight pushed the euro higher and helped douse some of the immediate fears about the ongoing European sovereign debt crisis. "At the moment, [gold] is going to be driven by the direction of the dollar," IG Markets analyst Cameron Peacock said, adding that the direction of gold prices has been dictated by dollar movement and is likely to remain so until the end of the year. Gold gained from an uptick in the euro as dollar-denominated commodities appear cheaper to holders of other currencies when the greenback retreats. The euro was at $1.3105 compared with $1.3082 late Tuesday in New York. Despite the gains, however, a credit downgrade of France or Germany by any of the rating agencies could spoil gold's modest uptrend before the year-end, Lee Cheong Gold Dealers Ltd. Director Ronald Leung said. But in the absence of negative news out of Europe, Leung expects gold to trade in a $1,580/oz-$1,650/oz range in the near-term amid signs of firm physical demand. Premiums on gold bars have risen from last week in Singapore and Hong Kong as demand is expected to increase during the upcoming Chinese New Year, bullion dealer GoldCore said in a note. "Demand from China ahead of the Lunar New Year in late January should help support prices," it said. In the case silver, BNP Paribas Analyst Anne-Laure Tremblay said the metal could average $35.75/oz in 2012 and $49.75/oz in 2013. "[Silver] could start outperforming gold when risk appetite rebounds, potentially driven by the (likely) announcement of a third round of quantitative easing measures in the U.S.," she said. At 0525 GMT, spot silver was at $29.63/oz, up 7 cents while platinum was at $1,435.25/oz, up $6.25 and palladium at $626.50/oz, up $1.50. Tremblay slashed her average platinum price forecast to $1,610/oz in 2012 from $1,825/oz. She also cut her average palladium prices outlook to $725/oz in 2012 from an earlier estimate of $785/oz. "The platinum price will be held back in 2012 by soft auto catalyst and industrial demand and by growth in mine supply, particularly in the first half of the year," Tremblay said. -By Arpan Mukherjee, Dow Jones Newswires; 64-4-471-5990; arpan.mukherjee@dowjones.com

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