Gold slips 2 pct after U.S. data; platinum falls on strike mediation pledge

May 27, 2014

London (May 27)   Gold slipped 2 percent to a 3-1/2 month low on Tuesday, extending losses after strong U.S. data lifted optimism about the economy, while platinum fell after South Africa's mining minister pledged to mediate in a long-running strike.

U.S. consumer confidence rose in line with expectations, with the Conference Board index at 83 in May from a downwardly revised 81.7 in April, as consumers saw the economy, including the labour market, in a better light.

Separately, the Commerce Department said durable goods orders increased 0.8 percent as demand for defence capital goods surged.

Spot gold fell 2 percent to its lowest since Feb. 10 at $1,265.76 an ounce in earlier trade and was down 1.9 percent at $1,268.10 an ounce by 1441 GMT, heading for its worst daily loss in two months. U.S. gold futures dropped 1.8 percent to $1,268.50 an ounce.

Equity markets were firmer, eroding gold's appeal as a hedge against riskier assets, while the dollar cut its losses after the data.

"The U.S. data was good today and most likely had an impact in sending prices lower than the recent range," Credit Suisse analyst Karim Cherif said.

"But beyond the data it is really the fact that there is very limited investor interest and this is why the impact of economic releases may be a bit emphasised."

Gold has struggled to break consistently above the $1,300-per-ounce level for the past two weeks, indicating a lack of conviction by investors and speculators, analysts said.

Developments in Ukraine, where air strikes and a paratrooper assault were launched against pro-Russian rebels who seized an airport on Monday, had little impact on gold, which is usually bought as an insurance against risk in times of global political uncertainty.

"The geopolitical situation could impact prices significantly but we need a big change in Ukraine to make a difference," Sharps Pixley CEO Ross Norman said.

Market players were also eyeing developments in physical markets which have been subdued over the past several weeks.

China's gold imports from main conduit Hong Kong fell to a 14-month low of 67.040 tonnes in April from 85.128 tonnes in March, as a weaker yuan and local discounts curbed demand.

China has approached foreign banks and gold producers to participate in a global gold exchange in Shanghai, as the world's top producer and importer of the metal seeks greater influence over pricing.

In No. 2 consumer India, investors are hoping the new government would relax rules imposed on gold imports last year, a move they believe will spur pent-up demand.


Among other precious metals, platinum fell 0.6 percent to $1,460.74 an ounce after new South African mining minister Ngoako Ramatlhodi pledged to mediate in a mines strike now in its fifth month. The metal reached its highest since September at $1,493.90 last week.

The world's top platinum producers - Anglo American Platinum , Impala Platinum and Lonmin - have been through several rounds of talks with the striking Association of Mineworkers and Construction Union (AMCU) but made little headway in narrowing the gap in their wage demands.

Ramatlhodi also said the government needed to start treating AMCU with respect.

"Gold's fall put a bit of pressure on platinum group metals and on top of that we obviously have these wage negotiations that are ongoing," Standard Bank analyst Walter de Wet said.

"I do think it's a case of people just looking back and waiting to see if there would be any resolution ... if you are looking to buy, these announcements may not make it a good time."

Palladium was down 0.1 percent to $829 an ounce and silver fell 1.8 percent to $19.05 an ounce.

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