* Optimism over economic growth, strong German data weigh
* Gold's 3rd weekly drop calls into question bull run
* Gold-silver ratio reaches lowest since November
* Coming up: US S&P Case-Shiller U.S. home prices Tuesday
(Recasts, adds comment, updates market activity, changes
dateline from LONDON)
By Frank Tang
NEW YORK, Jan 21 (Reuters) - Gold prices fell for a second
day on Friday as a stronger appetite for riskier assets such as
equities and an improving economic outlook diminished
safe-haven buying, more than offsetting a weaker dollar.
Bullion notched a third consecutive weekly loss, its
longest since July, which called into question the metal's
lengthy bull run due to signs that the economic recovery is
taking hold and as fears about an European debt crisis have
subsided for now.
Gold prices fell on Friday as safe-haven demand faded, a
day after the metal was pushed down nearly 2 percent to
two-month lows as investors sold bullion together with equities
and commodities like crude oil and copper that are perceived as
riskier.
"The German IFO today is an indication of ongoing strength
and an improvement in the EU economy. The idea that the U.S.
and European economies are doing better and less sovereign debt
concerns are weighing on gold investor psychology," said Bill
O'Neill, a partner in commodities firm LOGIC Advisors.
German business sentiment rose to its highest level in 20
years in January, surging past economists' forecasts on a
strong manufacturing sector. The bright European report
followed a raft of strong U.S. economic data, including
encouraging jobs and housing numbers on Thursday.
Spot gold <XAU=> fell 0.2 percent to $1,343 an ounce by 2
p.m. EST (1900 GMT). U.S. gold futures for February delivery
<GCG1> settled down $5.50 at $1,341 an ounce.
Bullion hit a low of $1,337.50, their weakest price since
Nov. 18, as financial markets opened in New York. U.S. traders
cited an increase in margin requirements for precious metals
futures as a reason for the decline. []
Silver <XAG=> inched up 0.2 percent to $27.53 an ounce.
The gold-to-silver ratio -- the number of ounces of silver
needed to buy an ounce of gold -- rose back towards 50, its
highest level since late November, as some traders believed
gold is becoming increasingly expensive relative to silver.
(Graphic: http://r.reuters.com/zuz57r)
Friday's turnover was modest as COMEX gold and silver
futures volumes on the New York Mercantile Exchange were
largely in line with their 30-day averages.
Analysts say outflows of money from products such as
physically backed exchange-traded funds suggest investor
appetite for gold is slackening after a run of
firmer-than-expected U.S. economic data and as concerns over
euro zone sovereign debt levels recede.
"There is a real lack of catalysts to provide any sort of
support," said Macquarie analyst Hayden Atkins. "Day by day the
data does seem to be supportive of the theory that activity is
pretty good for now, and the expectation is growing that things
will be OK through the year.
"There is nothing definitive either way to push it, and at
the margins (investors) are maybe putting their money somewhere
else, rather than putting it in gold."
Gold's slide was limited on Friday by a retreat in the
dollar to two-month lows versus the euro, with the European
single currency reaching its highest level since late November,
helped by improving confidence in region. []
Stock markets moved higher in both Europe and the United
States as strong earnings from key U.S. companies lifted
appetite for equities. []
"Gold used to be a fear indicator, and, as this fear
appears to be leaving the market, the gold price is under
pressure," said Commerzbank analyst Eugen Weinberg.
SILVER ETF HOLDINGS FALL
Silver prices had earlier hit a seven-week low at $27.10 an
ounce, pressured by a further outflows from the world's largest
silver-backed exchange-traded fund, the iShares Silver Trust
<SLV>.
Holdings of the trust fell by just over 10 tonnes on
Thursday, after recording their biggest one-day drop since late
November in the previous session. It has seen outflows of more
than 346 tonnes so far this year. []
Investment demand was a major driver in silver's price
gains of more than 80 percent last year.
Platinum <XPT=> rose 0.8 percent to $1,822.24 an ounce
against $1,808.50 on Thursday, while palladium <XPD=> climbed
1.4 percent to $819.50.
Prices at 2:22 p.m. EST (1922 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCG1> 1341.00 -5.50 -0.4% -5.7%
US silver <SIH1> 27.427 -0.046 0.0% -11.3%
US platinum <PLJ1> 1818.80 5.10 0.3% 2.3%
US palladium <PAH1> 816.75 0.90 0.1% 1.7%
Gold <XAU=> 1342.30 -3.10 -0.2% -5.4%
Silver <XAG=> 27.48 0.00 0.0% -11.0%
Platinum <XPT=> 1822.24 13.74 0.8% 3.1%
Palladium <XPD=> 819.22 10.75 1.3% 2.5%
Gold Fix <XAUFIX=> 1343.50 -0.50 0.0% -4.7%
Silver Fix <XAGFIX=> 27.14 -127.00 -4.5% -11.4%
Platinum Fix <XPTFIX=> 1817.00 5.00 0.3% 5.0%
Palladium Fix <XPDFIX=> 814.00 6.00 0.7% 2.9%
(Additional reporting by Jan Harvey in London; Editing by
Walter Bagley)
