NEW YORK Gold slid on Tuesday to its lowest price since November 3 at $1,073.50 an ounce as the dollar jumped to a 3-1/2-month high on the euro after news U.S. home sales surged to their highest level in nearly three years.
The news propelled the dollar and U.S. equity markets higher, with stocks shooting to a 14-month high. Both markets worked to undermine gold prices which tumbled through a series of seven-week lows. .N
A firmer dollar makes dollar-priced commodities including gold costlier for holders of other currencies.
Some gold sellers have redirected funds into the stock market, boosting share prices.
"There had been a positive correlation between gold and equities for quite awhile, and in recent weeks it went away because the risk trade was back on. Now, they've been moving money out of gold and appear to be putting some of it back into equities," said Andy Montano, a director at ScotiaMocatta.
The housing data bolstered the view that U.S. economic growth was gathering momentum, even though analysts pointed to a U.S. tax credit for the increased sales pace of previously owned homes in the United States.
Just the same, inventories of unsold homes declined further as did foreclosed properties in November.
"Home sales were a really positive report. The other positive point is that inventory continues to decline so demand and supply are moving back into equilibrium," said Anna Piretti, senior economist at BNP Paribas in New York.
Whereas gold had been bought as a safe haven investment during the credit and financial crises, Montano said, "Some of these issues appear to be turning and investors are now in the mood to change feet and invest in something else."
Spot gold was down at $1,082.05 an ounce by 3:32 p.m. EST versus $1,092.85 an ounce quoted in late New York dealings on Monday.
U.S. COMEX gold futures for February delivery also tumbled to a seven-week low at $1,075.20 an ounce on the New York Mercantile Exchange. The benchmark contract settled with $9.30 losses at $1,086.70 an ounce.
Appetite to buy bullion on dips was still seen keeping prices sustained at the lower levels, however, with some expecting the market's bull run to extend in 2010.
ScotiaMocatta, which specializes in trading the physical metal, has seen its share of buying interest at the lows.
"We've seen some good physical buying coming out of the main consuming areas in Asia and India and there have been opportunities for people who need gold to buy it on the way down," said Montano.
ETF HOLDINGS RISE
Other dealers, too, reported solid buying on dips in anticipation of renewed price appreciation in 2010.
The world's largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings rose 6.097 tonnes or 0.5 percent to 1,132.708 tonnes on Monday. They hit a record high of 1,134.03 tonnes on June 1.
And as a sign of robust physical demand, premiums for gold bars jumped to their highest in months after a drop in bullion prices spurred buying from investors and jewelers across Asia, dealers said.
Despite recent price dips, in the longer term many analysts believe bullion's potential to rise remains intact.
"The investment sentiment toward gold is very positive," said analyst Suki Cooper at Barclays Capital, adding the worries about inflation and the health of the economy could help support gold prices.
Among other precious metals, silver fell to $16.93 an ounce against $17.01, platinum was bid lower at $1,392.0 versus $1,414.50, and palladium slipped to $352.50 against $360.50 an ounce late on Monday.
In U.S. futures markets, March silver trimmed declines to end at $17.03 an ounce, down 0.50 cent. NYMEX January platinum tumbled $26.60 to finish at $1,396.90 an ounce and March palladium lost $11.15 to close at $354.25 an ounce.
(Additional reporting Humeyra Pamuk and Rebekah Curtis in London; Editing by David Gregorio)