PRECIOUS-Gold drops to 1-wk low at $942; key support gives way

                                
 * Gold prices slip as $950 support crumbles
                                
 * Dollar holds gains versus euro after Friday's rally
                                
 * ETFS Physical Palladium holdings up 2.7 percent to record
                                
 
                                
 (Adds comment, details, updates prices)
                                
 By Jan Harvey and Martina Fuchs
                                
 LONDON, Aug 10 (Reuters) - Gold fell more than 1 percent to
a one-week low of $942.00 an ounce on Monday as liquidation of
long positions on New York's COMEX futures market triggered a
wave of automatic sell orders, taking spot prices below $950.
                                
 Speculative net long positioning on COMEX rose last week to
just below the year high seen in June, analysts said, leaving
the market vulnerable to a correction.
                                
 Spot gold <XAU=> was bid at $945.50 an ounce at 1500 GMT,
against $953.80 an ounce late in New York on Friday. U.S. gold
futures for December delivery <GCZ9> on the COMEX division of
the New York Mercantile Exchange fell $12.00 to $947.50.
                                
 "Selling started...when the future broke through $953, last
week's low," said Heraeus trader Alexander Zumpfe. "Stops (were)
triggered at $950."
                                
 Many gold traders buy and sell automatically when prices
reach a certain level, determined by past price moves.
                                
 Little direction came from the currency markets, with the
dollar flat versus the euro. Gold has a close inverse
relationship with the U.S. currency, and tends to become pricier
for holders of other currencies as the dollar appreciates.
[FRX/]
                                
 Gold priced in Australian dollars <XAUAUD=R>, meanwhile,
fell to its lowest level since late November 2008, at A$1,122.42
an ounce. Euro-priced gold <XAUEUR=R> fell 1 percent to 663.84
euros.
                                
 On other markets, European stocks fell further in early
afternoon trade -- after hitting their highest close in more
than nine months in the previous session -- while U.S. stock
futures dipped on light profit taking after a four-week rally.
[.EU]
                                
 "We are correcting lower, we had very positive non-farm
payrolls last week and the dollar rebounded so today there is a
little profit taking," said Citigroup analyst Andrey
Kryuchenkov.
                                
 "The equities remain strong, (though) there is a little
pullback today, I think there will be more profit taking and
some technical selling. There is good support at $940," he
added.
                                
 Investors are reluctant to add significant risk to 
portfolios after Friday's broad rally sparked by the July U.S.
jobs report, which was seen as a clear indication the economy is
turning around from a deep recession. [MKTS/GLOB]
                                
 Oil prices edged above $71 a barrel, drawing some support
from the possibility of the first tropical cyclone of the
hurricane season. [O/R]
                                
 
                                
 SOFT DEMAND
                                
 Physical demand for gold remained soft, with the world's
largest bullion-backed exchange-traded fund, the SPDR Gold Trust
<GLD>, reporting a 3.97-tonne outflow on Friday.
                                
 The fund's gold holdings have declined by more than 40
tonnes in the last four weeks. [GOL/SPDR]
                                
 "With physical demand very low and ETF investors carrying
out further pockets of redemptions, (gold) is reliant on further
fund/speculative buying to fuel rallies," said James Moore, an
analyst at TheBullionDesk.com.
                                
 The metal is also taking support from the signing of a new
Central Bank Gold Agreement to limit official sector gold sales.
While a third pact was expected, the cut in the sales ceiling to
400 tonnes from 500 is lending support to prices, analysts said.
For an analysis click on: [ID:nLA367098]
                                
 Among other precious metals, silver <XAG=> was at $14.41 an
ounce against $14.59, tracking gold. Platinum <XPT=> was at
$1,247 an ounce against $1,261.50, while palladium <XPD=> was
flat at $273 an ounce.
                                
 South Africa's biggest union said on Saturday it was
considering a wage offer from state power firm Eskom after talks
last week to avert a strike that could cripple the republic.
[ID:nL8570061]
                                
 South Africa is the world's biggest platinum miner,
producing around four-fifths of global supply of the metal, and
the second-largest producer of palladium after Russia.
                                
 Palladium took support from news that ETF Securities' ETFS
Physical Palladium fund, which is backed by physical stocks of
the metal, added more than 9,000 ounces to its holdings,
bringing them to a record 351,440 ounces. [ID:LA229639]
 (Editing by Sue Thomas)