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Gold eases from 1-month high on positive U.S. outlook
NEW YORK |
NEW YORK (Reuters) - Gold closed slightly lower on Monday, easing after an early rally to within $10 of its record, as signs of U.S. manufacturing growth prompted selling.
Silver also retreated from a 30-year high as an early rally fizzled on the first trading day of 2011.
Safe-haven demand for bullion weakened after U.S. data showed manufacturing grew for a 17th straight month in December. Other recent economic data also has suggested U.S. growth could accelerate further in 2011.
"The stock market is doing very well, and with the dollar still relatively weak, investors tried to run the gold but they just failed," said Bruce Dunn, vice president of trading at bullion dealer Auramet.
Wall Street stocks surged more than 1 percent as the new trading year kicked off and the rally of late 2010 resumed on encouraging signs about the economy and seasonal factors.
The dollar was flat against a basket of currencies.
Spot gold inched down 0.2 percent to $1,416.45 an ounce at 2:52 p.m. EST (1952 GMT).
U.S. gold futures for February delivery settled up $1.50 an ounce to $1,422.90. COMEX gold volume totaled about 71,000 lots, nearly 60 percent below its 30-day average, preliminary Reuters data showed.
As the new year gets underway, expectations for more bad news on euro zone debt, concerns over potential inflation in developing economies and an increased focus on the U.S. deficit are set to maintain surging demand for gold, analysts said.
"Considering the overall expectations for the rally to continue, I could see a new high soon, as momentum will try to take it higher," said Ole Hansen, senior manager at Saxo Bank.
Gold rose to a session peak of $1,423.57 an ounce, its highest since early December, within $10 of a record $1,430.95 set on December 7.
"The fundamentals are driving the price, and those fundamentals remain fear-driven," said Pradeep Unni, a senior analyst at Richcomm Global Services in Dubai.
"Gold (steps) into the New Year with all its current fundamentals intact ... sovereign debt risk, macro uncertainty, concerns over currency stability, medium-term inflation fears as the U.S. Federal Reserve implements Quantitative Easing II, geopolitical tensions and low interest rates."
EURO ZONE DEBT WORRIES
The euro was little changed against the dollar, erasing earlier losses on persistent concerns about euro zone debt.
These worries can work both ways for gold. A weaker euro, and consequently stronger dollar, typically pressures gold prices, but concerns over sovereign debt are set to support demand for the metal as a haven from risk.
The strong inverse relationship between gold and the dollar weakened to such an extent last year that gold prices managed to rise nearly 30 percent at the same time that the dollar rose more than 6.5 percent against the euro.
Independent investor Dennis Gartman said in a note that central banks will continue to favor gold at the expense of currencies in the new year.
"Central banks who might otherwise have been adding to the reserve positions of euro, or sterling or yen, are at the margin adding to their reserve positions of gold instead...We fully expect that trend to obtain on into 2011," he said.
Among other precious metals, silver hit its highest since 1980 at $31.22 an ounce as investors continued to pick up the metal as a cheaper proxy for gold. It slipped 1 percent to $30.56 an ounce.
Platinum gained 0.2 percent to $1,770.49 an ounce, and palladium dropped 0.4 percent to $796.22, having earlier touched its highest since March 2001 at $805.50 an ounce.
Autocatalyst metal palladium is seen as the better bet for 2011, however, on expectations its market balance will tighten. Palladium and silver were among the best-performing precious metals last year, up 97 percent and 83 percent respectively.
In the United States, December is expected to be the third straight month of strong auto sales, capping a year of gradual recovery for the sector.
Prices at 3:11 p.m. EST (2011 GMT)
(Additional reporting by Jan Harvey in London; Editing by David Gregorio)
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