* Strong manufacturing, housing data prompt profit-taking
* Gold poised for gains as euro zone debt fears rankle
* Silver, palladium reach multi-year highs
* Coming up: U.S. auto sales due Tuesday
(Recasts, updates prices, market activity to close; adds link
to graphic)
By Frank Tang
NEW YORK, Jan 3 (Reuters) - Gold closed slightly lower on
Monday, easing after an early rally to within $10 of its
record, as signs of U.S. manufacturing growth prompted
selling.
Silver also retreated from a 30-year high as an early rally
fizzled on the first trading day of 2011.
Safe-haven demand for bullion weakened after U.S. data
showed manufacturing grew for a 17th straight month in
December. Other recent economic data also has suggested U.S.
growth could accelerate further in 2011. []
"The stock market is doing very well, and with the dollar
still relatively weak, investors tried to run the gold but they
just failed," said Bruce Dunn, vice president of trading at
bullion dealer Auramet.
Wall Street stocks surged more than 1 percent as the new
trading year kicked off and the rally of late 2010 resumed on
encouraging signs about the economy and seasonal factors. []
The dollar was flat against a basket of currencies. []
Spot gold <XAU=> inched down 0.2 percent to $1,416.45 an
ounce at 2:52 p.m. EST (1952 GMT).
U.S. gold futures for February delivery <GCG1> settled up
$1.50 an ounce to $1,422.90. COMEX gold volume totaled about
71,000 lots, nearly 60 percent below its 30-day average,
preliminary Reuters data showed.
As the new year gets underway, expectations for more bad
news on euro zone debt, concerns over potential inflation in
developing economies and an increased focus on the U.S. deficit
are set to maintain surging demand for gold, analysts said.
"Considering the overall expectations for the rally to
continue, I could see a new high soon, as momentum will try to
take it higher," said Ole Hansen, senior manager at Saxo Bank.
Gold rose to a session peak of $1,423.57 an ounce, its
highest since early December, within $10 of a record $1,430.95
set on Dec. 7. (Graphic: http://link.reuters.com/puk54r)
"The fundamentals are driving the price, and those
fundamentals remain fear-driven," said Pradeep Unni, a senior
analyst at Richcomm Global Services in Dubai.
"Gold (steps) into the New Year with all its current
fundamentals intact ... sovereign debt risk, macro uncertainty,
concerns over currency stability, medium-term inflation fears
as the U.S. Federal Reserve implements Quantitative Easing II,
geopolitical tensions and low interest rates."
EURO ZONE DEBT WORRIES
The euro was little changed against the dollar, erasing
earlier losses on persistent concerns about euro zone debt.
These worries can work both ways for gold. A weaker euro,
and consequently stronger dollar, typically pressures gold
prices, but concerns over sovereign debt are set to support
demand for the metal as a haven from risk.
The strong inverse relationship between gold and the dollar
weakened to such an extent last year that gold prices managed
to rise nearly 30 percent at the same time that the dollar rose
more than 6.5 percent against the euro.
Independent investor Dennis Gartman said in a note that
central banks will continue to favor gold at the expense of
currencies in the new year.
"Central banks who might otherwise have been adding to the
reserve positions of euro, or sterling or yen, are at the
margin adding to their reserve positions of gold instead...We
fully expect that trend to obtain on into 2011," he said.
Among other precious metals, silver <XAG=> hit its highest
since 1980 at $31.22 an ounce as investors continued to pick up
the metal as a cheaper proxy for gold. It slipped 1 percent to
$30.56 an ounce.
Platinum <XPT=> gained 0.2 percent to $1,770.49 an ounce,
and palladium <XPD=> dropped 0.4 percent to $796.22, having
earlier touched its highest since March 2001 at $805.50 an
ounce.
Autocatalyst metal palladium is seen as the better bet for
2011, however, on expectations its market balance will tighten.
Palladium and silver were among the best-performing precious
metals last year, up 97 percent and 83 percent respectively.
In the United States, December is expected to be the third
straight month of strong auto sales, capping a year of gradual
recovery for the sector. []
Prices at 3:11 p.m. EST (2011 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCG1> 1422.90 1.50 0.1% 0.1%
US silver <SIH1> 31.125 0.188 0.0% 0.6%
US platinum <PLJ1> 1781.10 7.80 0.4% 0.2%
US palladium <PAH1> 800.40 -2.90 -0.4% -0.4%
Gold <XAU=> 1415.25 -4.20 -0.3% -0.3%
Silver <XAG=> 30.59 -0.27 -0.9% -0.9%
Platinum <XPT=> 1770.49 2.99 0.2% 0.2%
Palladium <XPD=> 795.00 -4.50 -0.6% -0.6%
(Additional reporting by Jan Harvey in London; Editing by
David Gregorio)
