* Asia's physical market lukewarm; supply to improve next week * Spot gold targets $1,629 - technicals * Coming up: U.S. factory orders, Nov; 1500 GMT (Updates prices) By Rujun Shen SINGAPORE, Jan 4 (Reuters) - Spot gold traded steady on Wednesday, retaining most of the previous session's strong gains on encouraging economic data from the United States and Europe, and rising concerns on Iran also helped support sentiment. Bullion began the year by recouping all of last week's losses to post its largest daily rise since Oct. 25 and analysts say gold may benefit from its safe haven appeal despite worries about the euro zone debt crisis. "Gold may not be a safe haven in financial turmoil, but it does seem to function as a safe haven against real-world geopolitical risks," said Nick Trevethan, Senior Commodity Strategist at ANZ. Spot gold edged down 0.2 percent to $1,599.59 an ounce by 0654 GMT, after rising 2.4 percent in the previous session. U.S. gold was little changed at $1,601.40. Technical analysis suggested spot gold could rise to $1,629 during the day, said Reuters market analyst Wang Tao. Gold has moved in line with the euro which edged lower after rallying on Tuesday together with commodities and equities, buoyed by stronger-than-expected U.S. manufacturing data and two-decade-low unemployment in Germany. Shanghai spot deferred gold contract opened up 2.6 percent at 327.85 yuan a gram ($1,621 an ounce) as the market resumed trading after the New Year's Day holiday. Prices later eased to 326.75 yuan. Asia's bullion market remained lukewarm, while physical supply remained tight as refineries are just restarting operations after the holidays. "Physical supply is expected to improve next week," said a Singapore-based dealer, adding that Asian buyers will be searching for kilo bars to meet demand ahead of the Lunar New Year. Premiums on gold bars in Singapore were quoted in the range of $1.30 to $2 an ounce above spot prices, dealers said. Despite a 10-percent drop in gold prices in December, spot gold still scored a 10-percent rally in 2011, its 11th straight year of growth, with help from surging investment demand from individuals and rising central bank purchases. In the first 11 months of 2011, central banks around the world bought nearly 350 tonnes of gold, with Turkey making its largest single increase to its reserves on record in November, according to data from the International Monetary Fund. Spot silver fell 1 percent to $29.33 an ounce, retreating from a 6.4-percent rally in the previous session, its biggest one-day rise in more than three years. Precious metals prices 0654 GMT Metal Last Change Pct chg YTD pct chg Volume Spot Gold 1599.59 -2.60 -0.16 2.29 Spot Silver 29.33 -0.30 -1.01 5.92 Spot Platinum 1427.74 2.99 +0.21 2.49 Spot Palladium 656.97 -2.44 -0.37 1.07 TOCOM Gold 3944.00 60.00 +1.54 1.54 41603 TOCOM Platinum 3547.00 79.00 +2.28 2.28 13491 TOCOM Silver 70.70 3.30 +4.90 4.90 1137 TOCOM Palladium 1630.00 60.00 +3.82 3.82 362 COMEX GOLD FEB2 1601.40 0.90 +0.06 2.21 15709 COMEX SILVER MAR2 29.32 -0.25 -0.85 5.01 2531 Euro/Dollar 1.3038 Dollar/Yen 76.63 TOCOM prices in yen per gram. Spot prices in $ per ounce. COMEX gold and silver contracts show the most active months

Source