* Jobless claims drop, euro fall trigger technical selling
* Gold set for first weekly fall in 12 weeks
* Sentiment turns cautious before possible G20 development
* Coming Up: G20 meeting starting Friday
(Recasts, updates with comments, details and closing
prices)
By Frank Tang
NEW YORK, Oct 21 (Reuters) - Gold fell nearly 2 percent to
a three-week low on Thursday, extending its correction from a
record high as a drop in U.S. initial jobless claims and a
stalled euro rally aided technical selling.
Barring a big rebound on Friday, bullion is set for its
first weekly decline in 12 weeks, as the dollar gained and
investor sentiment turned cautious ahead of possible FX
developments from a G20 finance ministers meeting this
weekend.
Silver, which outperformed gold on the rally since August,
blazed the downhill trial, dropped almost 3 percent after a
report showed U.S. jobless claims fell more than expected last
week, although not enough to derail expectations that the
Federal Reserve will pump more money into the economy. Other
data showed an economy in slow-growth mode. [].
"The jobless claims drop is behind the decline, but gold's
weakness is likely to be temporary. It's more as a reason to
take profits than anything else," said James Steel, chief
commodity analyst at HSBC.
Spot gold <XAU=> dropped 1.4 percent to $1,325.21 by 3:41
p.m. EDT (1941 GMT), a much bigger move than the 0.4 percent
gain in the U.S. dollar index <.DXY> as more traders looked to
get ahead of the correction. Prices have fallen over 4 percent
since hitting a record high just above $1,387 last week.
U.S. December gold <GCZ0> settled down $18.6 an ounce at
$1,325.60, with trading volume at 30 percent above its 30-day
average.
Futures turnover was higher than the 30-day average in 3
out of 4 days so far this week, with Tuesday's volume at 72
percent above average as prices tumbled.
Gold has struggled to regain its poise since a nearly 3
percent slump on Tuesday -- its biggest set-back since July --
after China's surprise interest rate rise spurred a dollar
rally. Gold recovered with other commodity markets on
Wednesday, but lagged most gains for an unconvincing bounce.
Earlier on Thursday gold rose toward $1,350 an ounce, but
sentiment turned bearish after the metal failed to gain further
as the euro reversed early gains, traders said.
"Gold is in a consolidation phase. Euro was positive and
gold never caught the bid and could not make a new high," said
Jonathan Jossen, COMEX gold options floor trader.
Still, many analysts viewed gold's pullback as short-lived
as the U.S. central bank is set to embark on a second round of
quantitative easing as soon as next month, likely through
direct purchases of Treasury debt.
Gold accelerated losses to hit a three-week low of
$1,317.13 an ounce on technical selling after prices fell below
chart support at the intraday low of Oct. 8 at $1,325 an ounce,
said Scott Meyers, senior analyst at Pioneer Futures.
G20 MEETING IN FOCUS
Investment appetite has turned weaker as holdings of gold
in the world's largest exchange-traded fund, the SPDR Gold
Trust <GLD>, fell for a fourth consecutive session. []
Financial markets are alight with speculation over a
possible bargain by finance ministers and central bank chiefs
of the Group of 20 countries to rebalance the global economy.
Officials meet on Friday in Gyeongju, South Korea to
discuss a common path on managing currency, trade and economic
imbalances ahead of a G20 summit meeting in Seoul next month.
[]
"There have been a lot of investors going into gold already
and probably at this juncture, would probably be a little
hesitant, because now everyone is focusing on currency moves
and the outcome of what could happen at the weekend," said Ole
Hansen, a senior manager at Saxo Bank.
Silver <XAG=> fell 3.2 percent to $23.14 an ounce.
Platinum prices <XPT=> last traded down 0.4 percent at
$1,672.99, while palladium <XPD=> edged up 0.5 percent at
$587.49 an ounce.
Prices at 3:43 p.m. EDT (1943 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCZ0> 1325.60 -18.60 -1.4% 20.9%
US silver <SIZ0> 23.139 -0.725 0.0% 37.4%
US platinum <PLF1> 1673.40 -13.90 -0.8% 13.8%
US palladium <PAZ0> 586.30 -4.35 -0.7% 43.4%
Gold <XAU=> 1325.25 -18.25 -1.4% 20.9%
Silver <XAG=> 23.14 -0.76 -3.2% 37.4%
Platinum <XPT=> 1672.99 -5.86 -0.3% 14.2%
Palladium <XPD=> 587.99 3.29 0.6% 45.0%
Gold Fix <XAUFIX=> 1343.50 -1.75 -0.1% 21.7%
Silver Fix <XAGFIX=> 23.90 19.00 0.8% 40.7%
Platinum Fix <XPTFIX=> 1682.00 4.00 0.2% 14.7%
Palladium Fix <XPDFIX=> 596.00 0.00 0.0% 48.3%
(Additional reporting by Amanda Cooper in London;editing by
Sofina Mirza-Reid)
