PRECIOUS-Gold drops on firmer dollar, euro zone concerns
* Gold down on firmer U.S. dollar, below 3-week high * Coming Up: Redbook weekly U.S. retail sales; 1355 GMT (Updates prices) By Lewa Pardomuan SINGAPORE, Nov 13 (Reuters) - Gold slipped in thin trade on Tuesday after the euro dropped to a two-month low against the U.S. dollar and as uncertainty about another tranche of financial aid for Greece kept investors cautious. Although the threat of looming U.S. tax increases and spending cuts could still attract interest in gold, gains would be capped by a firmer dollar and weakening share prices, which often prompt investors to sell bullion to cover losses. Gold fell $2.70 to $1,725.04 an ounce by 0710 GMT, down from a 3-week high around $1,738 struck on Friday. Despite the recent fall, gold is still up around 10 percent so far this year. "I think there's some disappointed selling," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong, attributing this to gold's failure to break through $1,738, while strength in the dollar also affected the precious metal. "Physical buying is still minimal at these levels. I think (people) are still waiting for $1,700 to buy," said Leung, referring to jewellers. U.S. gold futures for December slipped $5.50 an ounce to $1,725.40. Cash gold powered to a record of about $1,920 in 2011, when investors turned to the metal as a safe haven during Europe's debt crisis. Volatile trading this year saw a surge to an 11-month high in the third quarter peter out below $1,800. But Jamie Sokalsky, chief executive of the world's biggest producer, Barrick Gold, said prices may hit $2,000 in 2013 as costs and barriers to production restrict supply, while demand from central banks and Chinese consumers keeps climbing. At the same time, economic uncertainties and new investment tools in Asia have driven more investors into gold, boding well for prices, he told Reuters on the sidelines of a London Bullion Market Association (LBMA) conference in Hong Kong that ends on Tuesday. In other markets, shares ticked lower on worries about a U.S. fiscal policy standoff, while the euro dropped to its weakest in two months after the euro zone and the International Monetary Fund clashed over a target date to shrink the debt pile. Amid a global fright over Washington's political brinkmanship, U.S. lawmakers return to the capital on Tuesday with a seven-week deadline to reach agreement on scheduled tax hikes and budget cuts that threaten to trigger another recession. Gold could benefit from the recession fears. "Whilst the uncertainty around the U.S. presidential elections came to an end with Obama's win, the so-called fiscal cliff is now the omnipresent topic," precious metals refiner Heraeus said in a report. "It describes cutbacks and tax increases in case a budget for new indebtedness cannot be agreed. Due to the strong opposition in Congress, difficult negotiations can be expected and hence new volatility and uncertainty." Silver and platinum tracked gold lower, but palladium rebounded from intraday lows. Dealers will watch an industry report on Tuesday by platinum refiner Johnson Matthey to gauge how reduced supply due to mine labour violence in top producer South Africa might hit overall output this year. Holdings of the largest gold-backed exchange-traded fund, New York's SPDR Gold Trust, dropped 0.07 percent on Friday from Thursday, while those of the largest silver-backed ETF, New York's iShares Silver Trust rose 0.45 percent over the same period. Precious metals prices 0710 GMT Metal Last Change Pct chg YTD pct chg Volume Spot Gold 1725.04 -2.70 -0.16 10.31 Spot Silver 32.29 -0.10 -0.31 16.61 Spot Platinum 1557.99 -2.25 -0.14 11.84 Spot Palladium 606.47 1.50 +0.25 -7.05 COMEX GOLD DEC2 1725.40 -5.50 -0.32 10.12 15753 COMEX SILVER DEC2 32.29 -0.23 -0.71 15.67 3059 Euro/Dollar 1.2687 Dollar/Yen 79.25 COMEX gold and silver contracts show the most active months (Editing by Jeremy Laurence)
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