PRECIOUS-Gold falls to 2-1/2-week low on stop-loss selling

* Silver, platinum, palladium hit multi-week lows
* Support from China inflation data outweighed by stop-loss
selling
* Spot gold could fall to $1,717/oz -technicals
* Coming up: U.S. retail sales, Sept; 1230 GMT

(Adds details, comments; updates prices)
By Rujun Shen
SINGAPORE, Oct 15 (Reuters) - Gold dropped to a 2-1/2-week
low on Monday, extending falls from the previous session, as
stop-loss selling more than offset support from China inflation
data suggesting there was more room to ease monetary policy.
Gold staged its biggest daily loss in more than two months
on Friday, after data showed U.S. consumer sentiment rose to a
five-year high, adding to concern that the Federal Reserve's
latest round of quantitative easing (QE3), aimed to improve job
market and supporting growth, may be trimmed.
China's annual consumer price inflation ticked down to 1.9
percent in September from August's 2.0 percent, leaving plenty
of room for further policy easing to shore up growth, which
would help support gold's role as a hedge.
But momentum in gold remained to the downside after the data
release, as the slide from Friday's intra-day high above $1,770
triggered stop-loss selling that was still pushing prices lower,
traders said.
"We traded through lots of stops this morning," said a
Singapore-based trader, "The China inflation story is outweighed
by such selling."
Spot gold fell to a 2-1/2-week low of $1,741.24 an
ounce before paring some losses to $1,744.06 by 0644 GMT, down
0.6 percent from the previous close.
U.S. gold lost 0.8 percent to $1,745.80.
Technical analysis suggested that spot gold could extend
losses to $1,717 an ounce after it broke below support at
$1,747, said Reuters market analyst Wang Tao.

The upbeat U.S. data, together with the lingering
uncertainty over the euro zone debt crisis, helped the dollar to
snap three days of losses, putting pressure on dollar-priced
commodities.
"After QE3 there were a lot of longs in gold," said Peter
Fung, head of dealing at Wing Fung Precious Metals in Hong Kong,
"Since $1,780-$1,790 seemed heavy, some funds sold positions to
take profit and now the long positions are getting squeezed."
Net length rose to 198,194 contracts in the week ended Oct.
9, the highest in nearly 14 months, the latest position data on
U.S. gold futures and options shows.

Attention will be on a string of data from China, including
a third-quarter gross domestic product number likely to show
that economic growth slowed for a seventh straight quarter to
its weakest since the depth of the global financial crisis.

Holdings of gold-backed exchange-traded funds slipped for
the second session straight to 74.979 million ounces on Oct. 11,
but were close to the record of 75.03 million ounces hit earlier
last week.
Among other metals, spot silver dropped to a
one-month low of $33.02, spot platinum fell to a
2-1/2-week low of $1,627.49, and spot palladium slid to
$627.22, its lowest in two weeks.

Precious metals prices 0644 GMT
Metal Last Change Pct chg YTD pct chg Volume
Spot Gold 1744.06 -9.69 -0.55 11.53
Spot Silver 33.15 -0.28 -0.84 19.72
Spot Platinum 1632.74 -9.86 -0.60 17.21
Spot Palladium 630.30 1.50 +0.24 -3.40
COMEX GOLD DEC2 1745.80 -13.90 -0.79 11.42 32474
COMEX SILVER DEC2 33.19 -0.48 -1.44 18.88 7583
Euro/Dollar 1.2911
Dollar/Yen 78.52
COMEX gold and silver contracts show the most active months

(Editing by Ed Davies)