March 20, 2012 / 4:25 AM / 7 years ago

PRECIOUS-Gold edges down, positive US outlook dents demand

* Safe-haven appetite eases as U.S. economy looks up
    * Spot silver falls 2.8 pct to $32.3/oz
    * Spot gold may break $1,671 resistance - technicals
    * Coming up: U.S. housing starts, Feb; 1230 GMT

 (Updates prices, adds quotes)	
    By Rujun Shen	
    SINGAPORE, March 20 (Reuters) - Gold edged lower on Tuesday
as a brightened U.S. economic outlook dented its safe-haven
appeal, while a buoyant equity market also prompted investors to
take money out of bullion.	
    The expectations of further monetary easing worldwide amid a
sluggish growth outlook had boosted investment in gold as a
hedge against inflation, sending cash gold prices up as much as
14 percent this year to near $1,800 an ounce.	
    But the flight to safety has started to lose its appeal with
upbeat U.S. data in recent months increasing investor confidence
in the recovery of the world's largest economy.	
    "Investors are looking at other investment options, as they
are less concerned about economic growth and more wanting to hop
on the equity rally, which clearly works against some of the
reasons why people buy gold," said Jeremy Friesen, commodity
strategist at Societe Generale in Hong Kong.	
    The benchmark S&P 500 on Monday rallied to its highest level
since May 2008 and 10 percent below the record close of 1,565.15
set in October 2007. The index has risen 12 percent so far this
year, outstripping gold's 6-percent gain. 	
    Friesen, however, cautioned that the momentum in U.S.
recovery could falter, putting the pressure back on the Federal
Reserve to keep real interest rates low to support growth.	
    "Rising treasury yields are consistent with the very bullish
outlook on U.S. economy, but we don't think that's on the cards
    U.S. Treasuries prices fell on Monday, with longer-dated
debt yields touching 4-1/2 month highs and investors likely to
trim their bond holdings further on signs of an improving U.S.
economy and some stabilization of Europe's debt troubles.
    Spot gold lost 0.3 percent to $1,655.35 an ounce by
0608 GMT, snapping three straight sessions of gains.	
    U.S. gold lost 0.7 percent to $1,655.50.	
    Technical analysis suggested that spot gold could break the
resistance at $1,671 an ounce during the day, Reuters market
analyst Wang Tao said. 	
    Traders said the diminished prospect of further monetary
easing from the U.S. Federal Reserve as the economic outlook for
the country improves led to expectations of an end to a period
marked with cheap and easy cash.	
    "The outlook for the money market is that cash will be
withdrawn from the market at some point, and the market is
pricing in a much tighter cash scenario," a Singapore-based
trader said.	
    "The appeal to buy more precious metals to increase their
weightings in portfolio is probably going to be tougher with
rising interest rates in the longer dates."	
    On the physical market, jewellers in India plan to close
shops for two more days, continuing their protest against the
duty increase on gold imports announced by the government last
    SPDR Gold Trust, the world's largest gold-backed
exchange-traded fund, said its gold holdings stayed unchanged at
1,293.268 tonnes for the fifth straight session on Monday,
despite the sharp pull-back in prices last week. 	
    Spot silver slid 2.8 percent to a low of $32.3 an
ounce, after prices rose for three sessions straight but failed
to break the resistance level at $33.	
    "Some smelters may be selling today after prices rose last
night," said a Shanghai-based trader, adding that smelters had
been unwilling to sell in the past week or so after prices
dipped to below $32.	
    He said Chinese physical demand was still sluggish and
buyers are eyeing a lower price level -- 6,500-6,600 yuan a
tonne -- to jump in.	
    Shanghai spot deferred silver contract edged
down 4 yuan to 6,744 yuan a tonne. 	
   Precious metals prices 0608 GMT
  Metal             Last    Change  Pct chg  YTD pct chg    Volume
  Spot Gold        1655.35   -5.05   -0.30      5.85
  Spot Silver        32.60   -0.62   -1.87     17.73
  Spot Platinum    1671.99   -2.54   -0.15     20.03
  Spot Palladium    699.50   -2.43   -0.35      7.20
  COMEX GOLD APR2  1655.50  -11.80   -0.71      5.66        12299
  COMEX SILVER MAY2  32.63   -0.32   -0.99     16.89         1968
  Euro/Dollar       1.3228
  Dollar/Yen         83.41
  COMEX gold and silver contracts show the most active months
 (Editing by Himani Sarkar)
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