London 16/08/2011 - Gold rebounded in European trading on Tuesday morning on renewed worries in the eurozone that boosted safe-haven buying ahead of a Franco-German meeting today on containing debt contagion, while physical demand also continued to provide support. Spot gold rose $5.20 to $1,773.30/1,774.10 per ounce. On the charts, a positive close last night provided a base for today's strength - the next resistance level is pegged at $1,802, while support now stands at $1,735. The metal remains some 2.3 percent below its all-time high of $1,815.20 hit on Wednesday last week but the two-day pullback, also due to rekindled risk appetite, gave some opportunities to physical traders to stock up. "Physical demand in countries like China and India emerged as soon as the price fell back," a trader said. "It has been slowly fading over the past 12 hours but dealers in these countries monitor prices and are ready to jump whenever there's a pullback." The US dollar also recouped some strength against the euro after falling to a three-week low of 1.446 following another round of disappointing US data yesterday. The main appointment in Europe this week is a meeting between German Chancellor Angela Merkel and French President Nicolas Sarkozy, which takes place at 1500 BST in Paris. This is widely expected to seek a solution to the eurozone debt crisis, which could spread beyond the peripheral states to the big economies of Italy and Spain. This is even more important after rating agency Standard & Poor's last week warned France of a possible credit downgrade. Markets will closely monitor the joint news conference scheduled for 1700 BST. "Merkel and Sarkozy need to come out with a very bold statement on future financial stability in the eurozone and the ongoing debt crisis in order to convince the markets that they are still in charge," broker VTB Capital said. "So, risk sentiment has improved slightly but debt fears and concerns over worsening macro numbers are unlikely to recede right away," it noted, adding that the short-term outlook for bullion prices is still upbeat, given current economic sentiment and low yields on major currencies. Datawise, several key pieces of US economic figures are set for release this week, including housing starts and building permits for July at 1330 BST and industrial production data at 1415. Second-quarter's earning for Dell and Wal-Mart among others are also expected. Silver fell 29 cents to $39.47/39.53 per ounce, retreating from a one-week high of $39.97 per ounce reached late in the previous session. In the platinum group metals (PGMs), platinum was flat at the previous close of $1,810/1,820 per ounce, having earlier risen to a fresh high since June13 at $1,824. "The spike in platinum provided an opportunity for physical traders to liquidate some holdings, and a little selling was seen in China," a trader said. Palladium fell $9 to $743/749 per ounce from the previous close and was down 2.1 percent from a one-week high of $759 yesterday. Still, supply-side developments are supportive of the PGMS. The National Union of Mineworkers (NUM) in South Africa has been in wage negotiations with Impala Platinum, the world's second-largest platinum supplier, and will decide this week whether to refer the dispute to arbitration. The NUM has threatened to strike if its demands are not met.

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