U.S. gold drops on chart weakness, fund selling

NEW YORK, Feb 13 (Reuters) - New York gold futures dropped
for a second straight day on Wednesday, as chart-based weakness
and a report showing lower physical bullion consumption
prompted funds to liquidate positions.

A stronger dollar, lower energy prices and solid gains in
the equity markets also took some steam out of gold's recent
rally.

"The market has just passed the support line, and I think
we are going to look at a two-way street again. But I think
people are still looking for gold if any of the shoes drop in
the economy," said Adam Hewison, president of INO.com in
Annapolis, Maryland.

At 10:42 a.m. EST (1542 GMT), the gold contract for April
delivery at the COMEX division of the New York Mercantile
Exchange GCJ8 slipped $8.60 to $902.50 an ounce. It peaked at
$913.50.

In the early sessions, the April contract had traded as low
as $899.50 an ounce, which marked the weakest in a week.

Hewison pegged major support levels at around $882 to $885
an ounce.

He said he would be "very concerned" if gold futures dropped
below $880 because the April contract could test a low of $850
if major support was broken.

The dollar rose versus major currencies after
better-than-expected U.S. retail sales data. A higher dollar
makes gold, which is denominated in the greenback, more
expensive for investors holding other currencies.

Industry-sponsored World Gold Council (WGC) said in a report
on Wednesday that global gold demand in the fourth quarter
dropped 17 percent year-on-year to 843.0 tonnes due to a sharp
drop in jewelry buying by top consumer India. [ID:nN12265518]

James Moore, analyst with TheBullionDesk.con in London, told
clients in a note that weak physical demand and profit taking
weighed on gold.

"While the current dip may still be viewed as a buying
opportunity, the metal's failure to rally as the dollar
weakened, and to conquer chart resistance at $927 suggests
further consolidation may be necessary, with gold potentially
filling some chart gaps between the $845 to $875 area," Moore
said.

Spot gold <XAU=> was quoted at $900.10/901.00, versus
Tuesday's New York close of $907.70/908.50. London bullion
dealers fixed the afternoon spot price at $899.00.

PLATINUM SCALES RECORD

In other metals, platinum rose further on the back of supply
issues from top producer South Africa and strong investment
demand.

"Platinum continues to be very strong. It looks like it's
still heading toward the $2,000 range. But the trend is very
much intact, unlike gold, which is a bit more on the defensive
side," Hewison said.

The active NYMEX platinum contract for April delivery PLJ8
jumped $35.80 or 1.9 percent to $1,957.60 an ounce. In
midmorning trade, it scaled a record high of $1,974 an ounce.
Spot platinum <XPT=> fetched $1,960/1,970.

The NYMEX March palladium contract PAH8 was down $3.55 to
$427.95 an ounce. Spot palladium <XPD=> fetched $422/426.

COMEX March silver SIH8 also dropped 18.0 cents or 1.1
percent to $17.07 an ounce, trading between $16.950 and
$17.250.

Spot silver <XAG=> was at $17.02/17.07, compared with its
last Tuesday quote of $17.13/17.18. London silver was fixed at
$16.98.
(Reporting by Frank Tang, editing by Matthew Lewis)