PRECIOUS-Gold drops as stimulus hopes fade, payrolls eyed

Thu Mar 7, 2013 3:04pm EST

* Gold snaps two-day rise, posts biggest daily drop in week
    * Signs of economic recovery pressure gold's safe-haven bids
    * SPDR Gold Trust stems outflow, Asian gold premiums down
    * Coming up: U.S. nonfarm payrolls report Friday

 (Updates throughout, changes byline, dateline, previous LONDON)
    By Frank Tang
    NEW YORK, March 7 (Reuters) - Gold fell on Thursday after
the European Central Bank and the Bank of England did not hint
at more economic stimulus, and as encouraging U.S. jobless
claims data fuelled optimism about the upcoming nonfarm payrolls
report.
    The metal's 0.5 percent decline snapped a two-day winning
streak, marking its biggest daily decline in a week. Bullion
dropped after the ECB gave no clear hints of further monetary
easing and the BOE decided not to restart its gilt purchases
plan.  
    The gold market now turns its focus to Friday's
all-important U.S. nonfarm payrolls report for February. Signs
of continuing recovery in the job market could prompt the
Federal Reserve to halt its economic stimulus earlier than
thought.
    "Gold is under pressure as the overall numbers have started
to pick up in the economy. If we see job growth on Friday, the
metal may continue to weaken," said Frank McGhee, head precious
metals trader at Integrated Brokerage Services LLC.    
    Spot gold was down 0.5 percent at $1,575.44 an ounce
by 2:34 p.m. EST (1934 GMT). 
    U.S. gold futures for April delivery settled up 20
cents at $1,575.10, with trading volume about 10 percent below
average, preliminary Reuters data showed.
    Gold's safe-haven status was also dented after the U.S.
House of Representatives passed a bill to avert a possible
government shutdown for now. 
    Strong U.S. data earlier this week, including a
better-than-expected private-sector jobs report, has brightened
the mood in the markets and lifted the Dow Jones industrial
average to record highs for a third consecutive session
on Thursday. 
    "Every time we've seen a strong number in recent weeks, it's
almost as if someone's been pressing the sell button (on gold)
automatically," said Ole Hansen, senior manager at Saxo Bank.
    U.S. job growth likely was moderate in February as higher
taxes and fears of deep government spending cuts made employers
cautious, suggesting there was still not enough momentum in the
economy for the Fed to scale back its stimulus. 
    Silver dropped 0.9 percent to $28.76 an ounce.
        
    SPDR GOLD STEMS OUTFLOW
    Underpinning gold prices were hopes that recent sharp
outflows from gold-backed exchange-traded funds appeared to have
bottomed out.
    Holdings of SPDR Gold Trust, the world's largest gold
ETF, stood unchanged on Wednesday after 11 straight sessions of
losses. 
    Investors pulled $5.6 billion from gold exchange-traded
products (ETPs) in February after a poor performance by the
yellow metal, but appetite for riskier, growth-oriented
industrial metals ETPs remained intact. 
    In the physical market, buyers in China slowed their robust
purchases of gold as purchases made in previous weeks started to
arrive, easing a supply shortage. 
    China's domestic gold prices had been trading at premiums of
over $20 above international prices in the past few days, but
that spread shrank to just over $10 on Thursday, and traders
said the premiums could fall further. 
    In platinum group metals, platinum was up 0.3 percent
at $1,589.74 an ounce and palladium climbed 1.5 percent
to $755.47.
 2:34 PM EST     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold APR   1575.10   0.20   0.0  1574.00 1584.90  126,608
 US Silver MAY  28.808  0.005   0.0   28.740  29.085   28,273
 US Plat APR   1595.10  15.30   1.0  1585.00 1601.20    9,077
 US Pall JUN    759.05  19.00   2.6   744.00  761.55    4,426
                                                               
 Gold          1575.44  -7.87  -0.5  1575.45 1585.39         
 Silver         28.760 -0.250  -0.9   28.780  29.060
 Platinum      1589.74   5.49   0.3  1587.00 1598.25
 Palladium      755.47  11.25   1.5   745.50  758.00
                                                               
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        156,782   202,894   175,099     14.42   -0.25
 US Silver       34,812    64,013    52,861     21.83   -1.64
 US Platinum     10,087    13,452    10,810     17.79   -1.14
 US Palladium     4,800     9,031     5,249                  
                                                               
 
 (Additiona reporting by Natalie Huet in London; Editing by
James Dalgleish)
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