PRECIOUS-Gold hits 10-month low despite Japan stimulus, hopes for ECB cut

Thu Apr 4, 2013 4:20pm EDT

* Liquidation in gold exchange-traded funds hits bullion
    * GFMS points to start of longer-term bear market in 2014
    * Coming up: U.S. March nonfarm payrolls Friday

 (Updates market activities, prices)
    By Frank Tang
    NEW YORK, April 4 (Reuters) - Gold fell for a third straight
session on Thursday, hitting a 10-month low as unprecedented
monetary stimulus from the Bank of Japan and hopes for another
European Central Bank rate cut failed to stem heavy selling of
bullion by funds.
    Palladium dropped around 3 percent, dragged down by a
commodities selloff led by crude oil as a four-month high in
U.S. initial jobless claims dented demand hopes. 
    Data showed investors pulled more money out of gold
exchange-traded funds. Bullion is now testing long-term chart
support around $1,525 an ounce, and analysts warned of further
losses if it breaks below that mark.
    "We have a lot of liquidation of the gold ETFs and the short
position on the Comex for gold remains very high, so a lot of
the macro hedge fund selling has put pressure on gold," said
Howard Wen, metals analyst at HSBC.
    Spot gold earlier fell as low as $1,539.74 an ounce,
its weakest point since May 30. It was last down 0.2 percent at
$1,554.60 by 3:30 p.m. EDT (1930 GMT).
    U.S. Comex gold for June delivery settled down $1.10
at $1,552.40, with volume about 5 percent below its 30-day
average, preliminary Reuters data showed.
    The gold market largely shrugged off news that the BOJ had
promised to inject about $1.4 trillion into the Japanese economy
in less than two years, and a pledge by the ECB that it was
"ready to act" if necessary.  
    Investors will look toward Friday's U.S. employment data for
more signals on the strength of that economy. A strong report
could cause gold to fall further, analysts said, because it
might make it easier for the U.S. Federal Reserve to end
stimulus measures that have made some investors leery of
possible inflation in the world's biggest economy.
    Analysts expect Friday's report to show American employers
hired at a moderate pace in March, suggesting the economy was
gathering momentum. 
    "If the nonfarm payroll turns out to be a very strong
number, there might be room for gold to fall," Wen said.
    
    ETF HOLDINGS DOWN, GFMS BEARISH
    On Wednesday, there was further liquidation of gold-backed
ETFs, with holdings of the world's largest, SPDR Gold Trust
, declining another 2.71 tonnes after the previous
session's 8.1-tonne outflow. 
    Bullion holdings at the world's major gold ETFs
 fell to their lowest since August 2012. Their
drop this week also marked one of the heaviest declines since
gold ETFs posted a record monthly outflow in February. (link.reuters.com/wah27t)
    Metals consultancy Thomson Reuters GFMS said in a report
that gold looks likely to enter a bear market cycle in 2014
after more than a decade of gains. The report added to the
downward pressure on gold.     
    Among other precious metals, silver tumbled to its
lowest level since July 24 at $26.62 an ounce. It was last down
0.1 percent at $26.89.
    Platinum dropped to its lowest since late August at
$1,504.50. It was later at $1,522.50, down 0.6 percent, while
palladium was down 3.1 percent at $726.50, having hit a
one-month low of $720.22.   
 3:30 PM EDT     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold JUN   1552.40  -1.10  -0.1  1539.40 1559.30  174,417
 US Silver MAY  26.767 -0.030  -0.1   26.575  27.015   47,608
 US Plat JUL   1517.80 -24.10  -1.6  1511.10 1540.30   16,714
 US Pall JUN    725.45 -30.00  -4.0   723.00  753.50   10,770
                                                               
 Gold          1554.60  -2.75  -0.2  1540.90 1559.26         
 Silver         26.890 -0.030  -0.1   26.670  27.060
 Platinum      1522.50  -9.00  -0.6  1512.00 1537.50
 Palladium      726.50 -23.50  -3.1   725.50  751.25
                                                               
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        185,732   200,919   172,509     15.56    0.26
 US Silver       58,237    53,722    52,120      22.7    1.60
 US Platinum     17,085    16,270    11,719     15.46    1.19
 US Palladium    10,881     7,021     5,180                  
                                                               
 

 (Additonal reporting by Clara Denina and Veronica Brown in
London; Editing by Dale Hudson and David Gregorio)