PRECIOUS-Gold drops over 3.7 pct in week on technical selling

Sat Feb 16, 2013 1:54am IST

* Technical selling puts gold under $1,600/oz
    * Gold posts biggest weekly drop, at 3.7 pct, since May
    * Dollar drop as G20 officials gather adds pressure
    * U.S. players prepare for long holiday weekend

 (Updates prices, adds comment, releads, rewrites throughout)
    By Carole Vaporean
    NEW YORK, Feb 15 (Reuters) - Gold prices finished nearly 1.8
percent lower on Friday, extending a week-long trend when
several bearish factors, including a rising dollar ahead of the
G20 meeting, conspired to push prices below key chart support
levels to lows last seen in August.
    Softer investor appetite for the precious metal, a dearth of
physical demand from China during its Lunar New Year holiday and
gains in the dollar pushed the precious metal down more than 3.7
 percent this week, its biggest weekly decline since May.
    Early selling provoked technically-driven selling when
several key support levels were ruptured on the way down.   
    "This is basically technical selling pressure. We're going
into a long weekend and you've got people squaring up positions
in what is most likely thin holiday trading," said Sean
McGillivray, head of asset allocation for Great Pacific Wealth
Management in Oregon.
    Spot gold repaired some of its earlier losses, to
stabilize around $1,605.75 an ounce, after falling as low as
$1,598.04 an ounce, its weakest since Aug. 19. By 1910 GMT, it
was off 1.76 percent after tumbling over 2 percent earlier.
    It was bullion's biggest one-day drop since November.
    U.S. gold futures for April delivery were down $28 an
ounce at $1,607.50, a 1.71 percent drop. It slid to a low of 
$1,596.7, a level last seen in mid-August. 
    "The 1,625 level was a big support and once that was broken,
stop-selling orders kicked off, and now we are in a new range of
$1,550 to $1,625," said Adrien Biondi, head of precious metals
trading at Commerzbank.
    Sell stops are automatic technical selling signals that
start after prices break through key support levels, which allow
traders to limit losses in a falling market.
    Thinner volumes likely accounted for a steeper decline than
usual with Chinese players still on holiday and U.S. players
heading out for the President's Day holiday on Monday.
    Chinese traders, however, were expected to take advantage of
the lower prices to replenish stocks when they return on Monday
from their week-long Lunar New Year celebrations.
    A firmer dollar against the yen and the euro also weighed on
the metal after data showing manufacturing in New York state
expanded in February for the first time in seven months.
 
    The yen fell on expectations that the Group of 20 finance
leaders this weekend will avoid targeting Japan over policies
that have weakened its currency, while oil prices sank on signs
of lagging economic activity. 
    Investment interest in gold has suffered in recent months
after the latest monetary easing measures from the Federal
Reserve failed to push prices above $1,800 an ounce, and as U.S.
economic data took on a firmer tone.
    Gold investment has also softened on signs that the United
States and Chinese economies are picking up, while investors
have already priced in European debt and economic weakness. 
 
    SOROS CUTS STAKE IN SPDR, PAULSON HOLDS
    Data released on Thursday showed billionaire investor George
Soros had cut his holdings in the SPDR Gold Trust, the
world's largest gold exchange-traded fund, by more than half in
the fourth quarter, while GLD's biggest shareholder John Paulson
left his holdings unchanged. 
    A few others also cut exposure to gold, including investment
fund PIMCO and Tiger Management's Julian Robertson, who
dissolved his entire stake in Market Vectors Gold Miners ETF.
    Noting that the data showed fund activity from a quarter
ago, McGillivray said, it was likely that only small speculators
may have take some positions off after seeing the report.
    "Guys that are fundamentally long gold are going to stay
long until we see a significant rise in interest rates or a
strong dollar policy." he said. 
    The SPDR's holdings fell 0.23 percent on Thursday from
Wednesday, while those of the largest silver-backed ETF, New
York's iShares Silver Trust, rose 0.26 percent during the
same period. 
    Gold investors will be watching for news that major powers
will offer a plan to ease sanctions barring trade in gold and
other precious metals with Iran in return for Iranian steps to
shut down its Fordow uranium enrichment plant, Western officials
said. 
    In other precious metals, platinum and palladium
 followed the rest of the complex lower.
    Spot platinum declined to a two-week low of $1,666.50 an
ounce and was last seen at $1,675 an ounce, down 2 percent.
Palladium was down 1.25 percent at $753.50, retreating from a
new best since September 2011 at $775 hit on Wednesday.
    Spot silver fell to a six-week low of $29.65 an
ounce, and held around those levels in late trade. 

 (Additional reporting by Jan Harvey.; Editing by Mark Heinrich,
Andrew Hay and Bob Burgdorfer)
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