* Heavy fund selling, weak consumer prices weigh
* Gold pressured by competition from Treasuries demand
* SPDR gold ETF sees further 0.608 T outflow
* Coming up: US housing starts data in June due Tuesday
(Recasts, adds comments, updates prices to market close,
changes byline, dateline, previous LONDON)
By Frank Tang
NEW YORK, July 16 (Reuters) - Gold dropped to its lowest
level in more than a week on Friday, as weak U.S. inflation
data and heavy inflows to government bonds from the equity
market prompted funds to sell the metal.
A fresh outflow from the world's largest gold exchange
traded fund and a report showing weak energy costs pushing US
consumer prices lower for a third straight month have
undermined appetite for the precious metal. []
"The data was a bit disappointing, and it created a
deflationary scare. There was a move out of paper assets and
equities into Treasuries, and precious metals were caught in
the middle," said James Steel, chief commodities analyst at
HSBC.
Gold prices ended the week almost 2 percent lower, and the
market has been largely treading water after news of massive
gold swap operations conducted by the Bank of International
Settlements in recent months stirred fears of gold dumping.
[]
Spot gold <XAU=> slipped as low as $1,185.85 an ounce and
was at $1,189.65 an ounce at 2:39 p.m. EDT (1839 GMT), against
$1,207.75 late in New York on Thursday. U.S. gold futures for
August delivery <GCQ0> settled down $20.10, or 1.7 percent, at
$1,188.20.
Sharp doses of fund selling sent gold futures prices
sharply lower in early sessions just after the U.S. COMEX
open.
COMEX floor trader Jonathan Jossen said there was heavy
selling of gold call options by a fund manager in early trade.
Gold hit a record $1,264.90 an ounce in late June, after
worries over the sovereign debt of some euro zone economies
sparked buying of the metal as a haven from volatility in the
currency markets. As those fears recede, it has slipped back.
"The story of Spain, Portugal and Greece is now calming
down and people are taking their chips off the table, so we are
seeing gold under pressure," said Jeremy East, global head of
commodity derivatives trading at Standard Chartered.
Gold's decline coincided with gains in U.S. Treasuries, as
falling inflation and tumbling consumer sentiment enhanced the
allure of safe-haven government bonds. Wall Street dropped 2.5
percent after data showed consumer sentiment fell to an
11-month low. [] []
EURO-GOLD NOW BROKEN TRADE?
Independent investor Dennis Gartman's reassessment of his
long-held strategy of buying euro-denominated gold also dented
sentiment, as the common currency is now sharply reversing its
losing trend. []
"Gold in U.S. dollar terms may still be, and probably is,
in a bull trend, but gold in EUR terms may now be a broken
trade," Gartman said in his daily Gartman Letter on Friday.
The euro touched a two-month high versus a broadly weaker
dollar on Friday. The euro has risen more than 9 percent from a
four-year low in June after smooth government debt auctions in
Greece, Portugal and Spain eased concerns about the euro zone's
sovereign debt problems. []
(Graphic: http://link.reuters.com/tef97m)
Gold was also under pressure from a further 0.608-tonne
outflow from the world's largest gold exchange-traded fund, the
SPDR Gold Trust <GLD>, on Thursday, which analysts said points
to weaker investment demand for the metal. []
Silver slipped in line with gold, with spot silver <XAG=>
last at $17.80 an ounce against $18.26.
Platinum <XPT=> was at $1,513 an ounce against $1,522.15,
while palladium <XPD=> was at $450.50 against $462.28.
Like other industrial metals, platinum group metals are
being weighed down by concerns over economic growth.
Prices at 2:53 p.m. EDT (1853 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCQ0> 1188.20 -20.10 -1.7% 8.4%
US silver <SIU0> 17.788 -0.574 0.0% 5.6%
US platinum <PLV0> 1512.10 -21.60 -1.4% 2.8%
US palladium <PAU0> 448.60 -18.60 -4.0% 9.7%
Gold <XAU=> 1191.05 -16.70 -1.4% 8.6%
Silver <XAG=> 17.81 -0.45 -2.5% 5.8%
Platinum <XPT=> 1512.50 -9.65 -0.6% 3.2%
Palladium <XPD=> 450.00 -12.28 -2.7% 11.0%
Gold Fix <XAUFIX=> 1189.25 -15.50 -1.3% 7.7%
Silver Fix <XAGFIX=> 18.25 -17.00 -0.9% 7.4%
Platinum Fix <XPTFIX=> 1512.00 6.00 0.4% 3.1%
Palladium Fix <XPDFIX=> 456.00 7.00 1.5% 13.4%
(Additional reporting by Jan Harvey and Maytaal Angel in
London; Editing by Sofina Mirza-Reid)
