PRECIOUS-Gold drops as U.S. growth optimism weighs, China sells

Mon Mar 10, 2014 3:19am EDT

* Gold falls for second session on US jobs data
    * Chinese investors sell; prices at $5-$6/oz discount
    * Prices could be supported at $1,320 - trader

 (Updates prices)
    By A. Ananthalakshmi
    SINGAPORE, March 10 (Reuters) - Gold extended losses to a
second session on Monday after strong U.S. jobs data eased
worries of an economic slowdown and dimmed the metal's
safe-haven appeal.
    Fears among Chinese investors over a slowdown in the world's
second biggest economy also hurt prices, with investors in
Shanghai futures and spot contracts dumping bullion. 
    The drop in prices after five straight weekly gains comes
despite weaker Asian equities and a geopolitical crisis in
Ukraine, which would typically support gold. 
    "Gold is being pushed lower on the nonfarm numbers and
higher 10-year U.S. Treasury yields," said one precious metals
trader in Hong Kong. "There is some pressure from China as well
because of the weak exports data." 
    Spot gold, which fell as much as 0.8 percent on
Monday, was down 0.6 percent at $1,331.50 an ounce by 0710 GMT.
It dropped nearly 1 percent on Friday.
    U.S. job growth accelerated sharply in February despite the
icy weather that gripped much of the nation, keeping the Federal
Reserve on track to continue reducing its monetary stimulus -
which had boosted gold prices. 
    China's exports unexpectedly tumbled in February, swinging
the trade balance into deficit and adding to fears of a slowdown
despite the Lunar New Year holidays being blamed for the slide.
 
    "We can see liquidation from the Shanghai futures exchange
and there is no fresh buying interest on the physical side,"
said Peter Fung, head of dealing at Hong Kong's Wing Fung
Precious Metals.
    China is the top consumer of gold.
    But with the crisis in Ukraine still unresolved and tensions
between the West and Russia remaining high, gold will not drop
below $1,320, Fung said.  
    Chinese prices were trading at a discount of $5-$6 an ounce
to spot prices on Monday, traders said, in a sign of weak
demand. Prices were at a premium of over $20 in the beginning of
the year.
    Investor sentiment towards gold has been positive this year
after a 28 percent drop in prices in 2013. 
    SPDR Gold Trust, the world's largest gold-backed
exchange-traded fund, said its holdings rose 1.50 tonnes to
805.20 tonnes on Friday. 
    Hedge funds and money managers raised their bullish bets in
gold futures and options for a fourth consecutive week as
geopolitical tensions boosted speculative interest to the
highest in more than a year, according to Friday data from the
Commodity Futures Trading Commission.    
    Other precious metals were all lower tracking gold but
palladium was still trading near its highest in a year,
boosted by fears of supply constraints from geopolitical
tensions in top producer Russia and mine strikes in
second-biggest producer South Africa.     

    PRICES AT 0710 GMT
 Metal              Last      Change   Pct chg
                                                
 Spot gold            1331.5    -8.35      -0.62
 Spot silver           20.67    -0.22      -1.05
 Spot platinum        1460.5   -17.25      -1.17
 Spot palladium       770.25    -8.75      -1.12
 Comex gold           1331.7     -6.5      -0.49
 Comex silver           20.7   -0.228      -1.09
 Euro                 1.3877                    
 DXY                  79.667                    
                                                
 COMEX gold and silver contracts show the most
 active months
 
 (Editing by Himani Sarkar and Subhranshu Sahu)
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