Gold down as technical selling offsets Greek hopes

An employee displays a gold tooth at a shop that purchases gold in the Ginza district of Tokyo August 23, 2011.

NEW YORK/LONDON (Reuters) - Gold prices fell on Thursday, as technical selling and nagging worries about euro zone debt extinguished a rally that began after Greece agreed to fiscal austerity measures.

Losses accelerated after bullion failed to breach 1,750 an ounce, its early December highs and an area of technical resistance in each of the last three sessions.

Analysts said a lack of concrete steps to avert a ruinous Greek default and economic uncertainty in major euro zone economies could keep pressure on bullion prices.

"We remain somewhat cautious on the precious metals group here, as we could see a 'buy the rumor, sell the news' type of reaction in the wake of the culmination of the Greek talks," said Edward Meir, metals analyst at INTL FCStone.

Spot gold was down 0.3 percent at $1,728.84 an ounce by 2:31 p.m. (1931 GMT).

U.S. gold futures for April delivery settled up $9.90 an ounce at $1,741.20 before losses gained pace.

Volume was about 20 percent below its 30-day average but in line with its recent trading pace.

Gold has swung back and forth this week as optimism over a bailout deal for Greece was countered by signs of economic slowdowns in Germany, France and Italy.

"Gold prices remain hostage to shifts in investor sentiment regarding the chances of a deal being reached. This uncertainty is injecting greater volatility into the gold market," said James Steel, chief commodity analyst at HSBC.

The metal was underpinned by news the ECB held interest rates at a record low, adding to gold's inflation-hedge appeal after the U.S. Federal Reserve said last month it would keep interest rates near zero until at least late 2014.

TECHNICAL TREND STALLED

Rick Bensignor, chief market strategist of Merlin Securities, said gold has stalled against December highs on charts, and the MACD suggested that it is losing some of its upside momentum in the short term.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Gold's MACD chart: r.reuters.com/han56s

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

"It's not bearish but the MACD shows that the rate of acceleration has decreased," said Bensignor.

The Moving Average Convergence/Divergence is a technical tool designed to identify changes in market trends by looking at the difference between moving averages for two periods.

Gold is up more than 10 percent this year, and it has gained more than $200 in the last six weeks, after the metal briefly entered a brief market in December.

The metal failed to benefit earlier this week from jitters over European debt, a sharp contrast to last year when safe-haven buying sent gold to a series of record highs last year.

Among other precious metals, silver fell 0.4 percent at $33.84 an ounce. Silver has been one of this year's best-performing commodities, up more than 20 percent this year.

Spot platinum eased 0.4 percent at $1,654.49 an ounce, while spot palladium was down 0.4 percent at $707.47 an ounce.

Platinum has narrowed its unusual discount to gold to about $80 an ounce, from over $200 earlier this year.

(Editing by David Gregorio)