Gold down as U.S. retail sales dampen easing hopes

NEW YORK Tue Aug 14, 2012 3:49pm EDT

Gold bars are displayed at a gold jewellery shop in the northern Indian city of Chandigarh April 11, 2012. REUTERS/Ajay Verma

Gold bars are displayed at a gold jewellery shop in the northern Indian city of Chandigarh April 11, 2012.

Credit: Reuters/Ajay Verma

NEW YORK (Reuters) - Gold slid on Tuesday as healthy U.S. retail sales data prompted bullion investors to scale back their bets based on expectations of an imminent stimulus from the Federal Reserve.

Platinum group metal prices, meanwhile, rose on supply worries due to a work stoppage at one of the top platinum producers in South Africa. Better economic sentiment on the retail data also boosted buying in PGMs, used by the auto industry.

Bullion dropped as much as 1 percent after data showed U.S. retail sales rose in July for the first time in four months. Demand climbed broadly for everything from cars to electronics, a sign consumers could drive faster economic growth in the third quarter.

"Better economic figures may make the Fed postpone or do away with additional stimulus," said George Gero, vice president of RBC Capital Markets.

A failed to decisively break above $1,625 prompted traders to elect stop-loss orders at prices below support the $1,600, Gero said.

Spot gold was down 0.7 percent at $1,599 an ounce by 3:15 p.m. EDT (1915 GMT), having hit a low at $1,594.10.

U.S. COMEX gold futures for December delivery settled down $10.20 an ounce at $1,602.40.

Silver was off 1 cent at $27.78 an ounce.

Trading volume was estimated at around 115,000 lots, about 30 percent below its 30-day average, preliminary Reuters data showed.

Some traders said turnover was unusually high in the minutes immediately after the release of the U.S. retail sales data, as gold prices had dropped around $20 when the euro also tumbled.

(Gold tracks euro's tumble: r.reuters.com/hyp99s)

A CME spokesman said that the Stop Logic functionality was triggered in gold futures at 8:42 a.m. EDT and that the gold market functioned properly and no trades were cancelled.

Stop Logic introduces a momentary pause in trading to prevent excessive price movements from cascading stop price orders.

Positive signals on the U.S. economy could cut the chances of another round of gold-friendly stimulus measures such as quantitative easing -- printing money to buy bonds. Expectations of such measures have supported prices in recent months.

"Whether the U.S. retail numbers diminish the chance of QE3 could be the short-term focus now, and has the potential to create a bit of headwind," said Ole Hansen, vice president at Saxo Bank.

Most Wall Street economists still expect the Fed to do more to stimulate growth this year, with the majority looking for action as soon as September following an annual meeting of economists and central bankers in Jackson Hole, Wyoming on August 31.

Investors now await U.S. regulatory filings by hedge funds and other big money managers which will show their gold investment holdings by the end of the second quarter.

SUPPLY CONCERNS BOOST PLATINUM

Platinum group metals outperformed gold after the world's third-largest platinum producer, Lonmin (LMI.L)(LONJ.J), shut its South African operations following violence caused by a feud between rival unions. Nine people were killed at its main mine.

South Africa produces about three-quarters of the world's platinum.

Platinum rose 1 percent to $1,393.24 an ounce and spot palladium gained 0.9 percent to $574.72 an ounce.

Platinum's unusual discount to gold held above $200 an ounce as demand worries continued. Platinum is down nearly 1 percent this month and off almost 20 percent from a February high.

(Additional reporting by Jan Harvey in London; Editing by Dale Hudson)

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