November 7, 2013 / 11:41 AM / in 4 years

PRECIOUS-Gold drops to 3-week low on ECB rate cut, US GDP

* U.S. second-quarter growth data beats expectations
    * European Central Bank cuts interest rates to record low
    * SPDR Gold Trust posts rare inflow
    * Coming up: U.S. October nonfarm payrolls Friday

 (Adds paragraphs 4 and 5, graphic link, updates market
    By Frank Tang and Jan Harvey
    NEW YORK/LONDON, Nov 7 (Reuters) - Gold fell to a three-week
low on Thursday, reversing early gains to end down nearly 1
percent on signs of strong U.S. economic growth and on the
European Central Bank's interest rate cut to a record low.  
    The precious metal posted gains after the ECB cut interest
rates and said it could take them lower still to prevent the
euro zone's recovery from stalling as inflation tumbles.
    Bullion later came under pressure when U.S. GDP data showed
economic growth accelerated in the third quarter as businesses
restocked shelves. But the slowest expansion in consumer
spending in two years suggested an underlying loss of momentum.
    A flurry of frantic sell orders shortly after the GDP data
briefly hammered gold prices, sending them below $1,300 an ounce
and setting the tone for the rest of the day. 
    From 8:40 to 8:50 a.m. EST (1340-1350 GMT) nearly 30,000
lots were traded, about a fifth of total turnover at the time,
Reuters data showed.
    The stock market's recent run-up on a better economic
outlook also sapped momentum in gold, a traditional safe haven,
analysts said. The S&P 500 stock index fell 1.1 percent
on Thursday but stayed within striking distance of a record high
set last week. 
    "When the stocks are rallying, investors have little reason
to head to safe havens and physical assets like gold, as they
can go into the stock market and do well there," said Thomas
Capalbo, a precious metals broker at New York futures brokerage
    Spot gold was down 0.9 percent at $1,305.85 an ounce
by 4:08 p.m. EST (2108 GMT), having earlier hit $1,298.31, its
lowest price since Oct. 17. 
    U.S. gold futures for December delivery settled down
$9.30 at $1,308.50, with trading volume about 15 percent above
its 250-day average, preliminary Reuters data showed, reversing
a recent trend of weak turnover.
    Gold prices have fallen 20 percent this year on expectations
that the Federal Reserve will taper its economic stimulus
    Analysts say Friday's U.S. jobs report for October may
provide the most telling insight into the impact of a government
shutdown last month that may provoke an extended continuation of
Fed bond buying.

    Gold investment interest firmed on Wednesday, with holdings
of the SPDR Gold Trust, the largest gold-backed ETF,
rising 2.1 tonnes to 868.42 tonnes, the first increase since
Oct. 22. 
    The fund, whose purchases of gold are a reflection of a
rising investor interest in the metal, has seen over 450 tonnes
in outflows this year, driving holdings to their lowest level
since early 2009.
    Among other precious metals, silver was down 0.9
percent at $21.58 an ounce. Platinum fell 0.9 percent to
$1,449.30 an ounce, and palladium dropped 0.5 percent to
$758.25 an ounce.
 4:08 PM EST     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold DEC   1308.50  -9.30  -0.7  1296.00 1326.00  181,716
 US Silver DEC  21.657 -0.111  -0.5   21.375  22.015   53,652
 US Plat JAN   1456.80 -10.60  -0.7  1452.50 1473.60    9,380
 US Pall DEC    759.15  -5.20  -0.7   753.05  765.00    5,916
 Gold          1305.85 -11.94  -0.9  1298.31 1325.31         
 Silver         21.580 -0.200  -0.9   21.410  21.970
 Platinum      1449.30 -12.69  -0.9  1454.00 1469.00
 Palladium      758.25  -3.58  -0.5   755.77  762.25
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   250D AVG   CURRENT     CHG
 US Gold        216,790    189,283     23.18   -1.01
 US Silver       70,022     58,610     35.14    1.70
 US Platinum      9,522     12,978     20.36    0.00
 US Palladium     6,583      5,806                  

 (Additional reporting by Clara Denina; Editing by William Hardy
and Andrew Hay)

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