Gold drops 1.5 percent on euro retreat, technicals

By Frank Tang

NEW YORK (BestGrowthStock) – Gold fell nearly 2 percent to a three-week low on Thursday, extending its correction from a record high as a drop in U.S. initial jobless claims and a stalled euro rally aided technical selling.

Barring a big rebound on Friday, bullion is set for its first weekly decline in 12 weeks, as the dollar gained and investor sentiment turned cautious ahead of possible FX developments from a G20 finance ministers meeting this weekend.

Silver, which outperformed gold on the rally since August, blazed the downhill trial, dropped almost 3 percent after a report showed U.S. jobless claims fell more than expected last week, although not enough to derail expectations that the Federal Reserve will pump more money into the economy. Other data showed an economy in slow-growth mode.

“The jobless claims drop is behind the decline, but gold’s weakness is likely to be temporary. It’s more as a reason to take profits than anything else,” said James Steel, chief commodity analyst at HSBC.

Spot gold dropped 1.4 percent to $1,325.21 by 3:41 p.m. EDT (1941 GMT), a much bigger move than the 0.4 percent gain in the U.S. dollar index (Read more about the global trade. ) (.DXY: ) as more traders looked to get ahead of the correction. Prices have fallen over 4 percent since hitting a record high just above $1,387 last week.

U.S. December gold settled down $18.6 an ounce at $1,325.60, with trading volume at 30 percent above its 30-day average.

Futures turnover was higher than the 30-day average in 3 out of 4 days so far this week, with Tuesday’s volume at 72 percent above average as prices tumbled.

Gold has struggled to regain its poise since a nearly 3 percent slump on Tuesday — its biggest set-back since July — after China’s surprise interest rate rise spurred a dollar rally. Gold recovered with other commodity markets on Wednesday, but lagged most gains for an unconvincing bounce.

Earlier on Thursday gold rose toward $1,350 an ounce, but sentiment turned bearish after the metal failed to gain further as the euro reversed early gains, traders said.

“Gold is in a consolidation phase. Euro was positive and gold never caught the bid and could not make a new high,” said Jonathan Jossen, COMEX gold options floor trader.

Still, many analysts viewed gold’s pullback as short-lived as the U.S. central bank is set to embark on a second round of quantitative easing as soon as next month, likely through direct purchases of Treasury debt.

Gold accelerated losses to hit a three-week low of $1,317.13 an ounce on technical selling after prices fell below chart support at the intraday low of October 8 at $1,325 an ounce, said Scott Meyers, senior analyst at Pioneer Futures.

G20 MEETING IN FOCUS

Investment appetite has turned weaker as holdings of gold in the world’s largest exchange-traded fund, the SPDR Gold Trust, fell for a fourth consecutive session.

Financial markets are alight with speculation over a possible bargain by finance ministers and central bank chiefs of the Group of 20 countries to rebalance the global economy.

Officials meet on Friday in Gyeongju, South Korea to discuss a common path on managing currency, trade and economic imbalances ahead of a G20 summit meeting in Seoul next month.

“There have been a lot of investors going into gold already and probably at this juncture, would probably be a little hesitant, because now everyone is focusing on currency moves and the outcome of what could happen at the weekend,” said Ole Hansen, a senior manager at Saxo Bank.

Silver fell 3.2 percent to $23.14 an ounce.

Platinum prices last traded down 0.4 percent at $1,672.99, while palladium edged up 0.5 percent at $587.49 an ounce.

(Additional reporting by Amanda Cooper in London;editing by Sofina Mirza-Reid)

Gold drops 1.5 percent on euro retreat, technicals