PRECIOUS-Gold near 2-week lows on stronger dollar, U.S. data

Fri Nov 1, 2013 3:12am EDT

* Gold set for first weekly drop in three weeks
    * Dollar index at two-week high 
    * Chinese imports strong, could support prices - analyst

 (Updates prices)
    By A. Ananthalakshmi
    SINGAPORE, Nov 1 (Reuters) - Gold was flat on Friday,
trading close to its lowest in nearly two weeks after sharp
losses in the previous session caused by month-end profit
taking, strong U.S. economic data and a higher dollar. 
    The metal is headed for a 2 percent weekly drop - its first
in three weeks - with expectations the Federal Reserve will
maintain its economic stimulus now factored in.
    Prices had gained 8 percent since hitting a three-month low
in mid-October after soft U.S. data last month and Washington's
budget gridlock led investors to believe the Fed would postpone
the tapering of its bullion-friendly stimulus measures.
    However, stronger U.S. data has rekindled some fears that a
December tapering is possible, leading investors to sell gold. 
    Spot gold edged up 0.1 percent to $1,324.61 an ounce
by 0646 GMT after Thursday's 1.4 percent slide. 
    "Until tapering begins, gold will be able to trade at this
level in a tight range for a considerable period of time," said
Helen Lau, an analyst at UOB Kay Hian Securities in Hong Kong.
    The pace of business activity in the U.S. Midwest jumped
higher than expected in October and U.S. jobless claims declined
last week in welcome news for the battered labour market.
 
    Investors worry an improving economy could prompt the U.S.
central bank to cut back sooner on its $85 billion monthly bond
purchases. 
    "Gold prices are still under pressure from outflows from
exchange-traded funds (ETFs). At the same time, retail demand is
very healthy," said Lau.
    China bought more than 100 tonnes of gold from Hong Kong for
a fifth straight month in September as demand for bullion bars
and jewellery stayed strong, keeping it on track to overtake
India as the world's biggest gold consumer this year.
    
    "There is strong demand even after the April rush. I think
the demand is still sustainable," Lau said. 
    Gold prices fell sharply in mid-April - about $200 an ounce
in two days - prompting strong pent-up demand in Asia for
jewellery, bars and coins.
    The metal has fallen about 20 percent this year as investors
have dumped holdings in ETFs and switched to higher-yielding
assets like stocks.
    SPDR Gold Trust, the biggest gold-backed ETF, has seen
outflows of over $20 billion this year, weighing heavily on
global prices. Holdings of the fund are near four-year lows. 
  
  Precious metals prices 0646 GMT
  Metal             Last    Change  Pct chg  YTD pct chg    Volume
  Spot Gold        1324.61    1.42   +0.11    -20.90
  Spot Silver        21.91    0.06   +0.27    -27.64
  Spot Platinum    1449.99    1.49   +0.10     -5.54
  Spot Palladium    738.23    3.23   +0.44      6.68
  COMEX GOLD DEC3  1324.50    0.80   +0.06    -20.96        11900
  COMEX SILVER DEC3  21.93    0.06   +0.29    -27.64         4305
  Euro/Dollar       1.3550
  Dollar/Yen         97.94
 
  COMEX gold and silver contracts show the most active months
 
 (Reporting by A. Ananthalakshmi; Editing by Richard Pullin and
Alan Raybould)