Gold drops as U.S. stocks rise on economic optimism

By Frank Tang

NEW YORK (BestGrowthStock) – Gold fell on Monday after strong U.S. home sales data boosted equities and limited the precious metal’s safe-haven appeal, but prices remaining below $1,200 an ounce drew physical demand, limiting losses.

The metal was hovering just above an upward trend support, but analysts said a sharp price decline could happen in an overly bullish gold futures market held up largely by short-term, speculative investors.

Bullion was pressured as U.S. stocks (Read more about the stock market today. ) gained ground after data showed sales of new U.S. single-family homes rebounded in June from May’s record low. <.

Spot gold was at $1,181.45 an ounce by 3:08 p.m. EDT (1908 GMT), down from $1,189.05 late on Friday. In the previous session gold briefly crossed $1,200 before finishing lower.

Gold lost some safe-haven appeal after Friday’s European banks stress test showed no nasty surprises.

Robin Bhar, an analyst at Credit Agricole, said that gold could still benefit from financial uncertainty despite easing worries about debt held by banks.

“The factors pushing gold haven’t gone away,” said Bhar, citing sovereign debt, the outlook for inflation and the devaluation of currencies.

The metal was sharply below the lifetime high had reached $1,264.90 in early June.

U.S. gold futures for August delivery settled down $4.70 at $1,183.10 an ounce.

Money managers cut their long, or bullish exposure, to U.S. gold futures by 18 percent for the week to July 20 as the metal’s prices hit two-month lows, U.S. CFTC’s trade data showed.

Still, Rick Bensignor, chief market strategist at investment banking group Execution Noble, said that the noncommercial long-to-gold ratio was at a very high 5-to-1.

“That’s why we are warning of extreme caution on long positions. The only significant buyers on the way down will be commercials covering shorts, when and if they choose to,” Bensignor said.

Gold was trading at less than $5 above at its 100-day moving average at $1,181 an ounce, but some analysts suggested the metal was near a natural entry point as prices fell toward its long-term upward trend support. (Graphic: http://link.reuters.com/fyc69m)

Analysts also said that activity on the physical market could pick up in August with the start of the festival season in major jewelry consumer India.

The gold market now turns its focus on the S&P/Case-Shiller 20-city home price index due Tuesday, which is seen up 4.0 percent year-over-year in May, following a series of mixed U.S. housing reports recently.

PLATINUM/PALLADIUM RALLY

Platinum earlier rose to its strongest in a month on fund buying driven by gains in equities. (MKTS/GLOB: )

Platinum reached as high as $1,552.50 an ounce, its highest since late June, and was at $1,550.50 an ounce versus $1,539.45 on Friday.

Palladium hit a session high of $476 an ounce, its highest since June 28, and was at $470.50 an ounce versus $464.55.

Analysts see platinum prices rising as a recovering automobile industry boosts demand for the auto catalyst metal, but the optimism has lessened after a hefty correction in May, a Reuters poll showed. (PREC/POLL: )

Silver was at $18.14 versus $18.08 on Friday.

Investing Analysis

(Additional reporting by Rebekah Curtis in London, Lewa Pardomuan in Singapore; Editing by David Gregorio and Lisa Shumaker)

Gold drops as U.S. stocks (Read more about the stock market today. ) rise on economic optimism