PRECIOUS-Gold drops on firmer dollar, euro zone concerns

Mon Nov 12, 2012 10:23pm EST

* 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 uncertainty about another tranche of financial
aid for Greece to help pay off its debt 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 $4.25 an ounce to $1,723.49 by 0247 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 $6.90 an
ounce $1,724.00.      
    Cash gold powered to a record 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 country's 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."
    Other precious metals, silver, platinum and
palladium tracked gold lower. 
    Dealers will watch an industry report on Tuesday by platinum
refiner Johnson Matthey for clues to whether reduced
supply due to mine labor violence in top producer South Africa
might turn the market into a deficit 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 0247 GMT
  Metal             Last    Change  Pct chg  YTD pct chg    Volume
  Spot Gold        1723.49   -4.25   -0.25     10.21
  Spot Silver        32.25   -0.14   -0.43     16.47
  Spot Platinum    1555.74   -4.50   -0.29     11.68
  Spot Palladium    603.47   -1.50   -0.25     -7.51
  COMEX GOLD DEC2  1724.00   -6.90   -0.40     10.03         9128
  COMEX SILVER DEC2  32.25   -0.27   -0.84     15.53         1871
  Euro/Dollar       1.2683
  Dollar/Yen         79.43
 
  COMEX gold and silver contracts show the most active months
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