PRECIOUS-Gold edges up; investors interest weakens

* Gold's correction seen healthy, short-term

* CME raises margins for gold, silver futures

* Gold to fall to $1,322 -technicals

* Coming up: U.S. ECRI index, Dec; 1530 GMT (Adds China trade; updates prices)

By Rujun Shen

SINGAPORE, Jan 21 (Reuters) - Spot gold edged up on Friday, recovering from a decline of two percent in the previous session, propped up by physical buying interest, but ebbing investment demand on an improved economic outlook continued to weigh on prices.

U.S. home resales jumped more than expected in December and claims for new jobless claims last week posted their biggest decline in nearly a year.

Investment interest in gold and silver has fallen in the beginning of the year, with holdings in the exchange-traded funds dropping to multimonth lows.

"It's long liquidation. ETFs keep redeeming," said a Singapore-based trader. "Some long-term gold holders have definitely been going out."

Holdings in the SPDR Gold Trust remained unchanged. Holdings in the iShares Silver Trust, the world's largest gold-backed exchange-traded fund, fell further to 10,526.70 tonnes, its lowest since November.

Spot gold gained 0.1 percent to $1,346.88 an ounce by 0700 GMT, but was on course for a third consecutive week of falls. U.S. gold was little changed at $1,346.5.

Gold will extend its loss to $1,322, as a downward wave "C" or wave "3" is progressing, said Wang Tao, a Reuters market analyst.

For a 24-hour gold technical outlook:

http://graphics.thomsonreuters.com/WT/20112101080230.jpg

The recent downturn in gold and silver prices is a healthy correction that will not last long, traders and analysts said.

"There's some selling pressure still ongoing in the gold market," said Yingxi Yu, an analyst at Barclays Capital. "But we still expect prices to venture into uncharted territory sometime this year. The macro environment still looks supportive for investment interest in gold."

An improved economic outlook dampens gold's safe-haven appeal, but inflation worries down the road may again drive investors to the precious metal, Yu said.

Also weighing on sentiment, the CME Group, the parent of the Chicago Board of Trade, said it would hike requirement margins on gold futures <0#GC:> by 11 percent, and silver futures <0#SI:> by six percent.

The dollar index pared some gains from the previous session, as the euro held its ground with investors wary of getting too bearish on the common currency after a recent rally turned round sentiment.

The physical market in Asia remained buoyant, as jewellers, investors and bullion traders hunted for bargains after prices fell to nearly $100 below the record high of $1,430.95 hit on Dec 7.

"Demand is still strong, with Thailand being the major buyer," said a Singapore-based dealer, adding that the next support level would be at $1,345.

Chinese activity is expected to slow as the week-long Lunar New Year holiday in early February draws closer.

Spot silver fell to a two-month low at $27.18, before recovering to $27.36, headed for a 3.7 percent weekly decline. Silver had lost over 11 percent so far this year, after posting a whopping 80 percent gain in 2010.

China's platinum imports in 2010 rose by 40 percent to nearly 76 tonnes, while palladium imports gained 17 percent to 29 tonnes. For details on China's silver, platinum and palladium trade, click Precious metals prices 0700 GMT Metal Last Change Pct chg YTD pct chg Turnover Spot Gold 1346.88 1.48 +0.11 -5.11 Spot Silver 27.36 -0.12 -0.44 -11.34 Spot Platinum 1804.50 -4.00 -0.22 2.09 Spot Palladium 804.47 -4.00 -0.49 0.62 TOCOM Gold 3602.00 -23.00 -0.63 -3.41 65274 TOCOM Platinum 4865.00 -2.00 -0.04 3.60 12052 TOCOM Silver 72.40 -3.10 -4.11 -10.62 3598 TOCOM Palladium 2150.00 8.00 +0.37 2.53 1084 Euro/Dollar 1.3498 Dollar/Yen 82.81 TOCOM prices in yen per gram. Spot prices in $ per ounce. (Editing by Clarence Fernandez)

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