PRECIOUS-Gold drops after 5-day rally, hit by strong equities, dollar

Tue Jan 7, 2014 4:10pm EST

Related Topics

* U.S. trade gap shrinks, lifting Wall Street, dollar
    * Physical demand in China, India limit gold's decline
    * Analysts expect higher interest rates to pressure gold
    * Coming up: U.S. Fed December policy meeting minutes
Wednesday


    By Frank Tang and Clara Denina 
    NEW YORK/LONDON, Jan 7 (Reuters) - Gold fell on Tuesday, as
a stronger dollar and rebound in U.S. stock prices prompted
investors to take profits in bullion after five straight
sessions of gains.
    The S&P 500 equities index rose 0.7 percent after
data showing a shrinking U.S. trade gap enticed buyers back into
stocks after three straight days of losses. The dollar
strengthened on the trade data, which also pressured gold. 
    Analysts said gold appeared to find support from funds'
index rebalancing and equities' losses following last year's
tumble in bullion prices and stock markets' record run-up.
    However, they expected gold prices to come under pressure
from a rising interest-rate environment after the Federal
Reserve announced plans to trim its massive bond-buying plan and
as the U.S. economic outlook improves.
    "While further upside cannot be ruled out in the short
term... the macro backdrop remains intact and so are the
challenges that are in store for gold for the rest of this
year," said UBS precious metals analyst Joni Teves.
    Spot gold fell 0.5 percent to $1,231.50 an ounce by
3:28 p.m. EST (2028 GMT).
    U.S. gold futures for February delivery settled down
$8.40 at $1,229.60 an ounce, with trading volume about 30
percent below its 30-day average, preliminary Reuters data
showed.
    Gold prices had gained nearly 4 percent in the previous five
sessions as equities prices dropped after record gains in 2013. 
    Bullion posted a 28 percent drop last year, its largest in
more than three decades, as the U.S. Federal Reserve announced
plans to unwind its ultra-loose monetary policy.

    RETAIL INVESTMENT DEMAND
    A survey by online precious metals market BullionVault said
physical gold buying among private investors fell last month.
    The Gold Investor Index, which measures the balance of
customers adding to gold holdings over those reducing them, fell
to a five-month low of 52.9 in December from 54 in November. A
reading of 50 signals an equal number of net gold buyers and
sellers.
    In the Asian physical market, Indian officials are in talks
to cut a record high import duty on gold and relax rules on
exports, government sources said. The measures helped narrow the
trade deficit, but now threaten to encourage smuggling.
 
    Traders will now focus on U.S. non-farm payrolls and trade
numbers on Friday, which will be preceded by Wednesday's minutes
of the Federal Reserve's December policy meeting.
    Silver, whose price tends to be more volatile than
gold, fell 1.7 percent to $19.81 an ounce, well below a
four-week high of $20.33 in the previous session.
    Platinum was down 0.2 percent at $1,409.74 an ounce,
having risen to a seven-week high of $1,420.75 on Monday, while
palladium gained 0.4 percent at $738.25 an ounce.
 3:28 PM EST     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold FEB   1229.60  -8.40  -0.7  1224.20 1244.70  118,441
 US Silver MAR  19.787 -0.316  -1.6   19.625  20.280   35,126
 US Plat APR   1415.40  -1.00  -0.1  1407.30 1421.30    7,593
 US Pall MAR    741.70   3.20   0.4   733.50  744.75    3,357
                                                              
 Gold          1231.50  -6.10  -0.5  1225.30 1245.25         
 Silver         19.810 -0.340  -1.7   19.660  20.260
 Platinum      1409.74  -3.01  -0.2  1412.10 1418.50
 Palladium      738.25   3.00   0.4   735.00  741.75
                                                              
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        137,343   128,154   186,718     19.82   -0.09
 US Silver       39,294    37,798    57,411     26.58    0.28
 US Platinum      7,654    14,671    13,091     19.56    0.80
 US Palladium     3,399     3,236     5,857     19.95    0.34
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