February 14, 2013 / 11:21 AM / 5 years ago

PRECIOUS-Gold drops to 6-week low on euro recession fears

* French, German economies both shrank late 2012
    * Global gold demand down 4 pct last year at 4,405 T-WGC
    * Coming up: U.S. New York State manufacturing index

 (Recasts, adds market details, updates prices)
    By Frank Tang
    NEW YORK, Feb 14 (Reuters) - Gold fell to a six-week low on
Thursday as renewed worries about the euro zone economy weakened
bullion's appeal as a hedge against possible inflation, and
after an industry report stirred fears about demand for the
precious metal.
    Gold fell around 0.5 percent, down for a second day, after
data indicated the euro zone slipped deeper than expected into
recession in the last three months of 2012 after its largest
economies, Germany and France, shrank late last year.
 
    A report by trade group World Gold Council showing gold
demand fell for the first time last year since 2009 also hurt
bullion investor sentiment. 
    Bullion, used by investors as a hedge against money printing
by central banks, has come under pressure on signs of recovering
U.S. jobs and housing markets.
    "The correlation across the asset classes have been breaking
down as of late. There are lots of asset rotation and chatter
about currency wars, so gold is a bit of a side show right now,"
said Axel Merk, chief investment officer of Merk Funds which
manages $630 million in mutual fund assets.
    Gold dropped 0.3 percent to $1,636.66 an ounce by
3:49 p.m. EST (2049 GMT). It sank as low as $1,632.34, its
lowest since Jan. 4.
    Analysts said technical selling could further pressure the
metal, which was hovering just $10 above $1,625.79 an ounce, a
six-month low.
    U.S. COMEX gold futures for April delivery settled
down $9.60 at $1,635.50 an ounce, with trading volume in line to
finish near its 250-day average, preliminary Reuters data
showed. 
    Thursday's U.S. data showing falling initial jobless claims
also offered hope the labor market recovery may have picked up,
which further diminished gold's appeal as a safe haven.
 
    Global gold demand fell last year for the first time in
three years, down 4 percent to 4,405 tonnes, as jewellery buying
abated in the key Indian and Chinese markets and U.S. and
European coin and bar investment dropped, the World Gold Council
said in a report. 
    Silver fell 0.7 percent to $30.52 an ounce, after it
fell below technical support at its 200-day average.
    
    FOCUS ON G20
    The next focus for the market is a two-meeting of G20
finance and central bank officials, beginning Thursday, for
clues about global growth and also their views on currencies.
    Easy monetary policies in advanced economies have sparked
fears of dangerous currency devaluations, or the so called
"currency wars" in which countries compete to lower their
exchange rates in a bid to boost their balance of payments.
 
    Among platinum group metals, platinum was down 0.6
percent to $1,707.74, while palladium eased 0.3 percent
to $763.22, having risen to a 17-month high at $775 in the
previous session.
 3:49 PM EST     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold APR   1635.50  -9.60  -0.6  1632.80 1650.00  156,622
 US Silver MAR  30.353 -0.516  -1.7   30.210  31.060   46,269
 US Plat APR   1710.90 -18.80  -1.1  1709.40 1735.00    7,361
 US Pall MAR    764.05  -8.00  -1.0   762.60  772.50    3,669
                                                               
 Gold          1636.66  -5.70  -0.3  1633.35 1649.66         
 Silver         30.520 -0.210  -0.7   30.250  31.060
 Platinum      1707.74 -10.25  -0.6  1712.00 1730.75
 Palladium      763.22  -2.00  -0.3   759.00  769.72
                                                               
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        172,146   186,181   172,646        14    0.02
 US Silver       54,601    48,429    52,014     20.58   -0.73
 US Platinum      7,506    15,954    11,081     17.26    0.06
 US Palladium     4,494     5,184     4,696                  
                                                               
 
 (Additional reporting by Clara Denina in London; Editing by
Marguerita Choy and David Gregorio)

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