NEW YORK (Reuters) - Gold fell for a third straight session Tuesday as weak U.S. factory and housing data combined with disappointing corporate earnings TO trigger fund liquidation.
Investors questioned the metal’s ability to extend its decade-long rally after regulatory filings showed billionaire financier George Soros dumped almost his entire $800 million stake in bullion investment in the first quarter.
Technical selling dragged gold prices after the metal breached major trend line support, and looked set to test below a 50-day average which it had held for the past two months.
“Dollar strength and commodities decline are symptoms of what’s going on with the global industrial cycle, and those are compounded by deleveraging,” said James Dailey, a portfolio manager with TEAM Asset Strategy Fund which has $54 million fund assets.
Spot gold fell 0.4 percent to $1,482.60 an ounce by 3:02 p.m. EDT (1902 GMT). U.S. gold futures for June delivery settled down $10.60 at $1,480 an ounce.
Silver gained 0.7 percent to $33.80 an ounce. It was now 32 percent below a sharp rally to a record high of $49.51 an ounce set on April 28.
U.S. futures activity was quieter than usual, with both gold and silver slightly below their 30-day norms, reversing a trend of heavier volume during recent sell-offs.
U.S. factory output slipped for the first time in 10 months in April while home building slumped, showing the economy got off to a weak start in the second quarter.
Signs of lackluster economic activity were also evident in corporate results on Tuesday from Wal-Mart Stores (WMT.N) and Home Depot (HD.N), both of which reported a drop in sales. Disappointing results from Hewlett-Packard Co (HPQ.N) also weighed.
Spot gold could face further technical headwinds after bullion breached a rising trend line dating back to late January, a key support bullion had held for nearly four months, said TEAM’s Dailey.
The metal is now $100 or 6 percent below its record highs above $1,575 an ounce set earlier this month.
Gold handed back its initial gains after a rally in the dollar exacerbated a sell-off in an already-fragile commodity complex and overshadowed the euro zone debt crisis which had propped the metal.
Billionaire financier George Soros, who called gold “the ultimate bubble,” dumped almost his entire $800 million stake in bullion in the first quarter, well before a commodities slump blamed partly on reports he was liquidating his holdings.
Famed gold bull John Paulson held his ground, but Soros was joined by several other big names, including Eric Mindich and Paul Touradji, according to 13-F filings with the U.S. Securities and Exchange Commission that show where hedge funds are placing their bets.
CBOE gold volatility index, a measure of bullion investor anxiety, .GVX has eased to 17 since hitting a 5-1/2 month peak in early May, but still remains close to its highest levels this year, meaning the price is tending to react more violently than usual to external forces.
ETFs UNDER PRESSURE
Gold holdings in exchange-traded funds monitored by Reuters fell for a 10th consecutive trading day Monday, bringing the net decline for the period to more than 1.14 million ounces. They are down 1.62 percent year to date. <GOL/ETF>
In the last month in gold, the only outflows had come from the largest fund, SPDR Gold Trust, which reported a 1.25-million-ounce outflow from mid-April to May 16.
Holdings of the world’s largest silver-backed exchange-traded fund, New York’s iShares Silver Trust, fell another 51 tonnes on Monday. The fund has seen outflows of 570 tonnes since silver’s pullback from record highs began in earnest in late April.
Platinum Week in London entered its second day, after the launch of refiner Johnson Matthey’s awaited report on the platinum group metals’ market fundamentals on Monday.
Among platinum group metals, platinum rose 0.5 percent to $1,759.99 an ounce, while palladium was up 1.4 percent at $717.50.
Additional reporting by Amanda Cooper and Jan Harvey in London; Editing by John Picinich