PRECIOUS-Gold drops 1 percent on technical selling, HSBC cut

Thu Jan 24, 2013 8:03pm GMT

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* Failure to break 50-day MA dents gold investors'
confidence
    * Futures volume high, partly boosted be Feb-April rollover
    * HSBC shifts allocation out of gold
    * Coming up: U.S. December new home sales Friday


    By Frank Tang
    NEW YORK, Jan 24 (Reuters) - Bullion posted its biggest one
day drop in three weeks, falling 1 percent on Thursday after
repeatedly failing to break above a key technical resistance,
its 50-day moving average at under $1,700.
   Investor confidence in gold was further eroded when major
bullion bank HSBC said in a note that it had halved its exposure
to gold, shifting its inflation hedge to U.S. Treasury
Inflation-Protected Securities (TIPS). 
    A recovery in gold prices earlier this week ran out of steam
as the metal hit strong overhead resistance between $1,690 and
$1,700. Gold has failed to breach that level in the last five
sessions in a row.
    "There are ... important areas of resistance gold
encountered this week and so far unable to break above, which
are the multimonth downward trendline, the 50-day moving average
and the recent highs," said Adam Sarhan, CEO of Sarhan Capital. 
    "I expect the recent trading range between $1,695 and $1,625
to continue," he said.
    Spot gold hit a low of $1,664.69 at just above its
200-day moving average. It was down 1 percent at $1,668.90 an
ounce by 2:19 p.m. EST (1919 GMT)
    U.S. COMEX gold futures for February delivery settled
down $16.80 at $1,669.90 an ounce.
    Trading volume was about 20 percent above its 250-day
average, preliminary Reuters data showed, partially boosted by
February-April contract rollover ahead of February's
first-notice day on Jan. 31. 
    Silver, which tends to be more volatile than gold,
dropped 1.7 percent to $31.68 an ounce.
    In the note, HSBC took a much less favorable view of the
metal as an inflation hedge. The bank attributed the move to a
decline in systematic risks, as the probability of a euro zone
breakup fell and "the most apocalyptic" of U.S. fiscal outlooks
was avoided.  
    HSBC cut gold's weight in its 3-year strategic portfolio by
8 percentage points to 7 percent, and by 9 percentage points to
7 percent in its tactical portfolio.
    Gold also came under pressure from the U.S. House of
Representatives' passage of a bill late on Wednesday to extend
the U.S. debt ceiling limit to May 19, clearing it for fast
enactment after the top Senate Democrat and White House endorsed
it. 
    The move avoided a repeat of a 2011 standoff between
Washington lawmakers that sent gold to record highs at $1,920.30
an ounce, analysts said.

    INDIAN DEMAND LANGUISHES
    Physical buyers in main gold consumer India reported that
they were struggling to sell stocks despite offering discounts
to buyers, as the market digested a 50 percent hike in import
tax. 
    Holdings of the world's largest gold-backed exchange-traded
fund, the SPDR Gold Trust, fell 1.8 tonnes on Wednesday,
bringing its overall outflow for the year to 16.7 tonnes. 
    More positively for prices, the Russian central bank's First
Deputy Chairman Alexei Ulyukayev said on Thursday Russia will
keep buying bullion. The bank said in 2005 it planned to lift
gold to 10 percent of forex reserves, a level it is approaching
after buying around 550 tonnes of gold in the last six years.
 
    Among platinum group metals, platinum eased 0.4
percent to $1,677.50 an ounce and palladium edged up 0.1
percent to $724.50 an ounce.
 2:19 PM EST     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold FEB   1669.90 -16.80  -1.0  1664.20 1685.80  165,166
 US Silver MAR  31.722 -0.717  -2.2   31.605  32.245   43,107
 US Plat APR   1683.80  -8.00  -0.5  1676.00 1693.00    9,046
 US Pall MAR    726.70   0.50   0.1   716.60  728.80    3,458
                                                               
 Gold          1668.90 -16.24  -1.0  1664.69 1686.06         
 Silver         31.680 -0.560  -1.7   31.630  32.250
 Platinum      1677.50  -6.75  -0.4  1678.75 1689.00
 Palladium      724.50   1.03   0.1   719.50  726.50
                                                               
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        213,429   150,922   173,862     12.58    0.03
 US Silver       49,191    42,941    53,338     19.91   -1.24
 US Platinum      9,193    16,012    10,842     17.07    0.01
 US Palladium     3,617     3,325     4,810
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