* Upbeat economic view lifts riskier assets, hurts gold
* Egypt unrest provides floor to bullion prices
* Palladium flirts with 10-year high after car sales rise
* Coming up: US jobless claims, factory orders Thursday
(Recasts, adds details, updates prices to market close)
By Frank Tang
NEW YORK, Feb 2 (Reuters) - Gold prices dropped 0.5 percent
on Wednesday after an encouraging U.S. private-sector jobs
report and relative stability in the Middle East -- despite
protests in Egypt -- diverted interest to higher-risk assets
and away from bullion.
Gold extended initial losses after data showed U.S. private
employers added more jobs than expected in January, the 12th
consecutive month that companies took on staff. The news dented
safe-haven demand. []
Economic optimism in the United States and Europe boosted
riskier investments such as equities at the expense of gold. On
Tuesday, the Dow Jones industrial average <> closed above
12,000, hitting its highest level since June 2008. U.S. stocks,
however, eased on Wednesday.
"The sell-off seemed to illustrate that people had lost
faith in gold and could see much better places to invest," said
Peter Hillyard, an analyst at ANZ Bank.
"(But) I don't think people want to sell it. They are
fearful about what is going to happen in the Middle East, and
what really is going on in the markets," he said.
Spot gold <XAU=> fell 0.5 percent to $1,334.40 an ounce by
3:04 p.m. EST (2004 GMT).
U.S. gold futures for April delivery <GCJ1> settled down
$8.2 an ounce at $1,332.10. Volume was lower than usual for a
third day in a row -- nearly 50 percent below its 30-day moving
average.
Open interest in COMEX gold futures continued to decline.
Exchange data showed it fell 800 lots to about 463,000
contracts, the lowest level since March 2010.
The largest gold exchange-traded fund, the SPDR Gold Trust,
saw its second-largest monthly outflow ever in January. The
iShares Silver Trust, the main silver ETF, said its holdings
fell by the most ever in a single month.
Gold's appeal as an alternative investment faded as stock
markets outside of the United States eked out gains as the
latest data added to evidence of a sustained global economic
recovery, even as escalating violence in Egypt and lofty oil
prices painted a disturbing backdrop. []
With confidence in the economic recovery growing and
concern over euro zone sovereign debt abating, gold may lose
some of its appeal as a safe haven, analysts say, though
support remains.
Citi analysts said in a note that their gold price outlook
is skewed to the downside with signs of the past three years'
risk-trade dissipating and as confidence is seemingly restored
in developed market economies.
EGYPT LENDS SUPPORT
Concern over unrest in Egypt and the prospect that it could
spread into the wider Middle East is continuing to put a floor
on prices, though it is prompting little new buying, analysts
said.
Supporters of President Hosni Mubarak threw petrol bombs,
wielded sticks and charged on horses and camels as they
fiercely attacked demonstrators in Cairo on Wednesday after the
army told protesters to clear the streets. []
Mubarak's announcement that he would not stand in elections
scheduled for September angered protesters who want an
immediate end to his 30-year rule.
"Political turmoil in Egypt couldn't have come at a better
time for gold," said UBS in a note. "With demand from China,
the largest physical consumer of late, slowing into the Lunar
New Year, geopolitical risk has provided a new support.
"Not that events in Egypt have injected a premium into the
gold price -- they have not -- but they have kept more weak
longs from liquidating and induced some short-covering."
Silver <XAG=> dropped 0.5 percent to $28.34 an ounce.
Silver's failure to breach key support at its 55-day moving
average suggests its recent rise was corrective and another leg
down is likely, Citi said. A breach of key support at $26.38 an
ounce opens the way for $25 and a possible test at the 200-day
moving average, it said. (Graphic:
http://link.reuters.com/wex77r)
Palladium touched its highest point in nearly a decade
after upbeat car sales numbers. Most of the palladium supply is
used in catalytic converters. []
Platinum <XPT=> gained 0.2 percent to $1,829.24 an ounce.
Palladium <XPD=> shed 0.9 percent to $812.22 after matching a
price last hit in March 2001, $825.50.
Prices at 3:05 p.m. EST (2005 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCG1> 1331.50 -8.10 -0.6% -6.3%
US silver <SIH1> 28.289 -0.225 0.0% -8.6%
US platinum <PLJ1> 1828.60 -4.40 -0.2% 2.8%
US palladium <PAH1> 810.55 -13.00 -1.6% 0.9%
Gold <XAU=> 1333.62 -6.83 -0.5% -6.0%
Silver <XAG=> 28.35 -0.14 -0.5% -8.1%
Platinum <XPT=> 1831.00 6.00 0.3% 3.6%
Palladium <XPD=> 812.22 -7.25 -0.9% 1.6%
Gold Fix <XAUFIX=> 1337.00 0.00 0.0% -5.2%
Silver Fix <XAGFIX=> 28.27 -5.00 -0.2% -7.7%
Platinum Fix <XPTFIX=> 1830.00 0.00 0.0% 5.7%
Palladium Fix <XPDFIX=> 819.00 4.00 0.5% 3.5%
(Additional reporting by Jan Harvey in London; editing by Jim
Marshall)
