PRECIOUS-Gold dips 1 pct on stop-loss sales; may flush out buying

Tue Dec 4, 2012 12:49pm IST

* US, spot gold hit lowest levels in nearly a month below
$1,700/oz
    * Spot gold may drop towards $1,692/oz - technicals
    * Coming Up: Euro zone producer prices, Oct; 1000 GMT

 (Recasts; adds comments, details; updates prices)
    By Rujun Shen
    SINGAPORE, Dec 4 (Reuters) - Gold fell about 1 percent to
its lowest in nearly a month on Tuesday on technical selling
after prices broke below key support levels, but the dip may
lure bargain hunters who expect the gloomy global economy to
keep gold buoyant.
    Gold broke below $1,710 an ounce and subsequently $1,705,
key technical levels it had held since early November, which
triggered stop-loss selling, traders said.
    "The break probably will not last long," said a Sydney-based
trader. "Funds are happy to buy on dips, and so will the central
banks and the Chinese."
    The prospect of continuously loose monetary policy around
the world will provide support to gold, perceived as a hedge
against inflation as a result of rampant cash printing by
central banks. 
    In the latest easing move by central banks, Australia's
central bank cut interest rates a quarter point to match a
record low on Tuesday, stepping up efforts to safeguard the rich
world's most resilient economy from the risk of recession as a
mining boom peaks. 
    Spot gold fell nearly 1 percent to $1,698.3 an ounce,
its lowest since Nov. 6, before recovering to $1,702.24 by 0649
GMT.
    The most-active U.S. futures contract dropped as
much as 1.3 percent to a near one-month low of $1,698.5, and
stood at $1,703.
    Technical analysis suggested that spot gold is poised to
fall to $1,692 after breaking support at $1,707, said Reuters
market analyst Wang Tao. 
    
    
    The slide the precious metals complex was eye-catching,
compared to the performance of other markets. Asian shares
slipped on an unexpected fall in U.S. manufacturing data, while
the dollar index held near a one-month low. 
 
    A softer greenback usually boosts the appeal of
dollar-priced commodities including gold, but traders said the
stalemate in the U.S. budget talks has made investors hesitant
to jump in. 
    "Gold is still under pressure despite the support from
currency markets," said Peter Fung, head of dealing at Wing Fung
Precious Metals in Hong Kong.
    "The physical market is quiet, there is some profit-taking,
and we don't see fresh buying interest from the funds."
    The "fiscal cliff", $600 billion of U.S. tax hikes and
spending cuts to kick off in early 2013, threatens to push the
world's biggest economy into a recession. 
    In other precious metals, spot platinum dropped to a
one-week low of $1,585.20 an ounce before recovering to
$1,588.49. Spot palladium, which rose for the past five
weeks straight, fell 1.1 percent to $678, heading to its biggest
daily decline in a month.
    Recent car sales data have helped platinum group metals
recently, which are used widely in producing exhaust-reducing
catalysts.
    U.S. auto sales in November raced to a five-year high for
that month on a rebound from storm-ravaged October and the need
to replace aging vehicles, leaving industry executives hopeful
about 2013. 
    Last week, China's Ministry of Industry and Information
Technology said the country's car sales and output will both
exceed 19 million units this year. In the first 10 months of the
year, total vehicle sales gained 3.6 percent on the year to 15.7
units.   

      Precious metals prices 0649 GMT
  Metal             Last    Change  Pct chg  YTD pct chg    Volume
  Spot Gold        1702.14  -12.71   -0.74      8.85
  Spot Silver        33.32   -0.29   -0.86     20.33
  Spot Platinum    1588.49  -12.26   -0.77     14.03
  Spot Palladium    678.50   -7.30   -1.06      3.98
  COMEX GOLD DEC2  1703.00  -18.10   -1.05      8.69        28025
  COMEX SILVER MAR3  33.38   -0.38   -1.12     19.58         5870
  Euro/Dollar       1.3058
  Dollar/Yen         82.05
  COMEX gold and silver contracts show the most active months
 
 (Editing by Ed Davies)
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