PRECIOUS-Gold drifts from 1-mth high, recovery hopes dull appetite

Thu Jan 24, 2013 2:37am EST

* Traders eye COMEX option expiry, Fed meeting next week
    * Chinese buying steady, but weaker from past years
    * Spot gold may fall to $1,665.94-$1,669/oz -technicals
    * Coming up: euro zone Markit manufacturing flash PMI, 0858
GMT

 (Adds details and comments, updates prices)
    By Rujun Shen
    SINGAPORE, Jan 24 (Reuters) - Gold inched down on Thursday,
pulling further away from a one-month high hit earlier in the
week, as increasing confidence in the global economic recovery
dulls bullion's appeal as a safe-haven investment.
    Gold has failed to breach key technical resistance at $1,700
an ounce over the last few days, lacking fresh impetus as a
generally improving economic outlook steers investors towards
riskier assets. 
    Growth in China's massive manufacturing sector accelerated
to a two-year high in January, the HSBC flash purchasing
managers' index (PMI) showed on Thursday, adding to signs of a
rebound in the world's second largest economy. 
    The Jan. 28 expiry of COMEX options contributed to the
stagnation, as a large open interest position on a $1,700 strike
kept prices steady, traders said.
    Spot gold had inched down 0.4 percent to $1,678.81 an
ounce by 0721 GMT, off a one-month peak of $1,695.76 hit on
Tuesday.
    U.S. gold was down 0.5 percent to $1,678.70.
    Market participants are also waiting for a U.S. Federal
Reserve policy meeting next week, which could shed light on the
future of its ultra-loose monetary policy, a main driver of gold
prices for the past two years.
    "We have the FOMC (Federal Open Market Committee) and
non-farm payrolls data, which could shake this market out of its
technical trading doldrums," said a Singapore-based trader.
    Gold has traded in a range between roughly $1,680 and $1,695
for the past week, lacking momentum to move either way as
investors weigh the continuously easing monetary stance against
a slowly improving global economy.
    Technical analysis suggests spot gold may fall into a range
of $1,665.94-$1,669 an ounce during the day, as a corrective
wave cycle that started at the Jan. 4 low of $1,625.79 has been
completed, said Reuters market analyst Wang Tao. 
    "As long as we don't see any trend for tightening monetary
policy, gold is unlikely to fall much," said a trader based in
the eastern Chinese province of Zhejiang.
    "But current levels are too high to buy. I bought some at
$1,650 and probably will sell when prices rise to $1,750."
    
    CHINA STILL BUYING, BUT LESS THAN BEFORE 
    Physical orders continued to flow in from China, which is
gearing up for the Lunar New Year holiday in February, when gold
jewellery and bars are popular gifts, traders said. But the pace
of buying was slack compared with previous years.
    "The pre-holiday demand is not as strong as before, which is
part of the reason that prices are stuck," said a Beijing-based
trader. 
    "If stock markets continue to perform well, there will be
even fewer people interested in gold, since the gold market does
not seem to have much support this year from QE (quantitative
easing), unlike last year." 
    Holdings of SPDR Gold Trust, the world's top
gold-backed exchange-traded fund, eased slightly to 1,334.115
tonnes, down 16.7 tonnes so far this year, but still up more
than 6 percent from a year earlier.
    Spot silver dropped 1 percent to $31.89 an ounce,
pausing after an eight-day rally, its longest winning streak
since April 2011 when prices marched to a record high near $50. 
    Spot palladium fell 0.8 percent to $717.50, headed
for its biggest daily decline in more than two weeks. 
    
      Precious metals prices 0721 GMT
  Metal             Last    Change  Pct chg  YTD pct chg    Volume
  Spot Gold        1678.81   -6.33   -0.38      0.25
  Spot Silver        31.89   -0.35   -1.09      5.32
  Spot Platinum    1679.50   -4.75   -0.28      9.41
  Spot Palladium    717.50   -5.97   -0.83      3.68
  COMEX GOLD FEB3  1678.70   -8.00   -0.47      0.17        20074
  COMEX SILVER MAR3  31.92   -0.52   -1.62      5.57         7001
  Euro/Dollar       1.3338
  Dollar/Yen         89.32
  COMEX gold and silver contracts show the most active months
 
 (Editing by Daniel Magnowski)