PRECIOUS-Gold falls 1 percent, US nonfarm payrolls eyed

Thu May 3, 2012 4:00pm EDT

* Sharp drop in crude oil, weak US service data weigh
    * Gold could test $1,600 on strong jobs data-trader
    * US traders digest new CME margin on non-hedge positions
    * Coming up: U.S. April nonfarm payrolls Friday


    By Frank Tang and Jan Harvey	
    NEW YORK/LONDON, May 3 (Reuters) - Gold fell 1 percent on
Thursday as tumbling crude oil prices and weak U.S.
service-sector data sent bullion prices to their biggest one-day
drop in a month ahead of a key U.S. nonfarm payrolls report.	
    The metal, which for most of the year has tracked the
performance of riskier assets, accelerated losses after data
showed the ISM services index fell to 53.5 last month from 56.0
in March, while the employment gauge slipped to the lowest level
since December. 	
    Analysts said the weak ISM data, however, was not enough to
change the view that the Federal Reserve might hold off on
additional quantitative easing, or government bond purchases,
following a recent string of strong U.S. economic indicators. 	
    Some investors reduced their bullish bets in gold as hopes
for U.S. monetary easing faded. Gold has lost $150 from its peak
on Feb. 29 when Fed Chairman Ben Bernanke made no mention of a
new round of easing.	
    A strong reading of the U.S. employment market on Friday
would likely further curb speculation on any Fed stimulus, a
prospect that had been seen as gold-friendly. 	
    "Things will have to look very weak tomorrow morning to see
any upside momentum come back. If the nonfarm payrolls number is
stronger, then we'll see gold really test $1,600 an ounce," said
Carlos Perez-Santalla, a precious metals trader at PVM Futures.	
    Spot gold was down 1.1 percent at $1,635.20 an ounce
by 3:16 p.m. (1916 GMT) for its biggest daily decline since
April 4. It touched a one-week low of $1,630.70 earlier in
trading.	
    U.S. gold futures for June delivery settled down
$19.20 an ounce at $1,634.80. Trading volume was largely in line
with its 30-day average, preliminary Reuters data showed.	
    U.S. gold investors were digesting new rules from CME Group
, which sought to clarify revisions in its margin policy
for non-hedge positions. There was consternation among Chicago
and New York traders about the abruptness of the change that
will make trading more expensive for some of the exchange's most
active members.  	
    Gold posted a small loss after moving in a narrow range in
April, and the metal's repeated failure to rise above an area of
major technical resistance such as its 100-day moving average
has led some momentum traders to turn to better-performing
assets such as equities.	
    Ongoing jitters over the euro zone's debt crisis and Spain's
ability to finance itself also pressured gold. 	
    	
    WEAK INVESTMENT, PHYSICAL DEMAND  	
    Gold has fallen by about 1.4 percent so far this week on
weak physical demand, having dropped for three out of the last
five weeks. Lackluster investment buying was also reflected in
an outflow in gold-backed exchange traded funds (ETFs).	
    Silver dropped 1.9 percent at $30.05 an ounce.
Platinum was down 1.6 percent on the day at $1,531.74 an
ounce, while palladium fell 1 percent to $658.97 an ounce.	
    The palladium market registered its largest surplus in five
years in 2011 as sales of Russian stockpiled metal and outflows
from exchange-traded funds offset a surge in demand from the
auto industry, according to a report on Thursday from metals
consultancy Thomson Reuters GFMS. 	
	
 3:16 PM EDT     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold JUN   1634.80 -19.20  -1.2  1631.30 1654.30  138,435
 US Silver MAY  29.959 -0.633  -2.1   29.880  30.480       87
 US Plat JUL   1533.10 -31.30  -2.0  1530.10 1565.60    7,070
 US Pall JUN    661.35  -8.10  -1.2   660.00  670.25    2,384
                                                               
 Gold          1635.20 -17.43  -1.1  1631.45 1653.25         
 Silver         30.050 -0.580  -1.9   29.900  30.650
 Platinum      1531.74 -25.21  -1.6  1534.25 1560.00
 Palladium      658.97  -6.98  -1.0   661.75  671.00
                                                               
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        158,239   164,692   194,673     17.84    0.81
 US Silver       43,972    54,805    63,685     25.64    0.09
 US Platinum      7,205     7,862     8,283        19    0.00
 US Palladium     2,586     3,127     4,673