* Germany, France clash on key issues before EU summit
* Open interest in US futures falls, price volatility down
* Physical demand in India wanes due to weak rupee
* Coming up: U.S. existing home sales Friday
(Adds market details, updates prices)
By Frank Tang
NEW YORK, Oct 18 Gold fell on Thursday as weaker
U.S. equities and uncertainty over the commitment of Germany and
France to battle the euro zone debt crisis prompted the bullion
market to consolidate gains after its recent rally.
The metal declined as the dollar rose against the euro after
Berlin and Paris, Europe's central powers, clashed over greater
EU control of national budgets and other issues before a summit
of the bloc's leaders.
Gold tracked the S&P 500 index, which fell after the
number of Americans filing new claims for jobless benefits
spiked last week. Earlier in the day, data showed China's
economy slowed for a seventh straight quarter, even though other
numbers pointed to a mild year-end rebound.
The gold market appears to have factored in optimism related
to the U.S. Federal Reserve's monetary stimulus announced in
September, analysts said. Gold was still $150 per ounce higher
than its mid-August level despite a recent pullback.
"Without any other major drivers, the precious metals will
continue to show weakness and test the downside" because the
latest buyers might lack patience to wait for another bull run,
said Carlos Perez-Santalla, a broker at brokerage PVM Futures.
Spot gold fell 0.4 percent on the day to $1,742.50 an
ounce by 2:29 p.m. EDT (1829 GMT).
U.S. COMEX gold futures for December delivery settled
down $8.30 an ounce at $1,744.70, with trading volume at 40
percent below average, preliminary Reuters data showed.
Open interest in gold futures fell 3 percent this week, a
sign funds were liquidating positions and switching to
better-performing assets such as equities, analysts said.
Gold's 30-day implied volatility fell to 13 on
Wednesday, near a 15-month low.
The trading range is expected to be narrow this week with
the COMEX November option expiring next week and significant
open interest near its current level at $1,750 an ounce, TD Bank
strategists said in a note.
Also pressuring bullion was a bearish call on crude oil by
Goldman Sachs, one of the biggest banks in commodity trading.
The firm has called an end to the oil price super-cycle,
reversing years of bullish forecasts, citing a rise in U.S. and
Canadian unconventional oil supplies.
Silver fell 1 percent to $32.83, tracking gold.
PHYSICAL DEMAND LAGGING
Analysts said physical demand was weaker than expected for
the time of year, when the traditional Indian wedding season,
the Islamic Eid al-Adha festival and the build-up to Christmas
and Chinese New Year tend to ramp up bullion buying.
Demand from gold importers in India appeared to wane on
Thursday as a weaker rupee drove up domestic prices in the
world's largest gold buyer for the third consecutive session.
Among platinum group metals, platinum dropped 1.1
percent to $1,640.74, while palladium was up 0.8 percent
2:29 PM EDT LAST/ NET PCT LOW HIGH CURRENT
SETTLE CHNG CHNG VOL
US Gold DEC 1744.70 -8.30 -0.5 1739.00 1753.40 92,928
US Silver DEC 32.868 -0.364 -1.1 32.745 33.325 26,684
US Plat JAN 1643.70 -26.80 -1.6 1643.00 1677.80 8,824
US Pall DEC 647.20 -6.20 -0.9 645.15 655.60 1,974
Gold 1742.50 -7.19 -0.4 1738.80 1751.79
Silver 32.830 -0.330 -1.0 32.760 33.280
Platinum 1640.74 -18.46 -1.1 1643.50 1669.74
Palladium 643.50 -5.10 -0.8 647.77 653.50
TOTAL MARKET VOLUME 30-D ATM VOLATILITY
CURRENT 30D AVG 250D AVG CURRENT CHG
US Gold 97,459 166,822 174,132 15.19 -0.07
US Silver 29,151 49,870 56,618 35 7.00
US Platinum 8,908 15,447 9,770 22.14 -1.57
US Palladium 1,992 4,158 4,792
(Additional reporting by Clare Hutchison in London; Editing by
Dale Hudson and Grant McCool)