* Gold lost 2.5 pct, biggest day loss in over 3 weeks
* Investors favor stocks at gold's expense; S&P hits 1,300
* Bullion prices near support after heavy liquidation
* Coming up: U.S. advanced 4th-qtr GDP report due Friday
(Recasts, adds comments, updates prices, new byline, dateline,
previously LONDON)
By Frank Tang
NEW YORK, Jan 27 (Reuters) - Gold fell more than 2 percent
on Thursday, its biggest one-day drop in more than three weeks,
on waning investor appetite and some anticipation of interest
rate hikes, which would make zero-yield gold less appealing.
Investors have recently opted to buy investments seen as
riskier such as equities and industrial commodities at the
expense of bullion. The S&P 500 index <.SPX> traded above the
1,300 level for the first time since September 2008 on strong
corporate earnings. []
"The pending home sales looked very good, and there are
concerns about inflation. Just the threat of the Fed raising
the slightest amount of interest rate will have a tremendous
negative effect on gold," said Miguel Perez-Santalla, vice
president of Heraeus Precious Metals Management.
Positive U.S. housing and factory data and a warning about
inflation by a European Central Bank official kindled
speculation that some major economies would move to raise
interest rates sooner than previously thought. []
Spot gold <XAU=> fell as low as $1,310.99 an ounce, the
weakest price since Oct. 5. It was down 2.5 percent at
$1,313.30 at 2:32 p.m. EST (1932 GMT). U.S. gold futures for
February delivery <GCG1> settled down $14.60 or 1.1 percent at
$1,318.40.
Silver <XAG=> fell 2.8 percent to $26.83 an ounce.
Investor selling has helped pressure silver prices more
than 11 percent so far this month, taking the gold:silver ratio
-- the number of silver ounces needed to buy an ounce of gold
-- to its highest since late November this month.
U.S. COMEX gold futures volume totaled about 370,000 lots,
about two-thirds higher than its 30-day average, preliminary
Reuters data showed. Turnover was in line with recent higher
volume this week when prices tumbled.
Traders also cited busy contract switching from the current
benchmark February contract to April ahead of the start of
February delivery notices next Monday.
After a relatively steady morning, bullion abruptly dropped
late in the New York session in tandem with crude oil as euro
erased gains after initially setting a two-month high against
the dollar. []
While some question whether the metal's multi-year bull run
is running out of steam, bullion has managed to resume its
rally each time after a significant decline during the past 10
years. Gold is about $120 below its all time high of $1,430.95
set Dec. 7.
Gold has lost more than 7 percent in January, which would
be its first monthly decline in six months. Gold's technical
picture appeared to deteriorate after breaking below key 50-
and 100-day moving averages.
Dennis Gartman, publisher of the Gartman Letter, said on
Thursday that spot gold's 150-day moving average at $1,307 an
ounce should offer support, but he expected bullion to fall
further to its long-term trendline at an area from $1,279 to
$1,290 an ounce.
GOLD FUNDS SEE OUTFLOWS
Holdings of gold in the SPDR Gold Trust <GLD>, the world's
largest gold-backed exchange traded fund, were unchanged after
recording their biggest ever one-day fall on Tuesday. The
largest silver ETF the iShares Silver Trust <SLV> also lost
metal on Wednesday. []
Friday's Commodity Futures Trading Commission Commitments
of Traders report showed the net speculative long in gold
futures market has contracted.
In addition, open interest in COMEX gold futures declined
further on Wednesday, down about 3 percent to below 500,000
lots, following a 14 percent decline on Monday as investors
liquidated long positions.
"The confluence of selling from these various categories
has all the characteristics of capitulation," said Tom
Pawlicki, MF Global's precious metals and energy analyst.
Platinum <XPT=> dropped 1.5 percent to $1,782.40 an ounce,
while palladium <XPD=> lost 1 percent to $804.500.
Prices at 3:14 p.m. EST (2014 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCG1> 1318.40 -14.60 -1.1% -7.2%
US silver <SIH1> 27.031 -0.097 0.0% -12.6%
US platinum <PLJ1> 1800.10 6.30 0.4% 1.2%
US palladium <PAH1> 813.50 8.90 1.1% 1.3%
Gold <XAU=> 1311.52 -34.84 -2.6% -7.6%
Silver <XAG=> 26.87 -0.72 -2.6% -12.9%
Platinum <XPT=> 1782.74 -27.76 -1.5% 0.9%
Palladium <XPD=> 804.50 -8.28 -1.0% 0.6%
Gold Fix <XAUFIX=> 1334.50 -3.00 -0.2% -5.4%
Silver Fix <XAGFIX=> 27.39 29.00 1.1% -10.6%
Platinum Fix <XPTFIX=> 1807.00 4.00 0.2% 4.4%
Palladium Fix <XPDFIX=> 814.00 5.00 0.6% 2.9%
(Additional reporting by Amanda Cooper and Jan Harvey in
London; Editing by Alden Bentley)
