* Gold hits near two-month low on technical selling
* August gold breaks below major upward trend line
* Pullback possible as trends for spot, front-month intact
* Coming up: U.S. housing starts in June due Tuesday
(Recasts, adds comments, updates prices, changes byline,
dateline, previous LONDON)
By Frank Tang
NEW YORK, July 19 (Reuters) - Gold dropped 1 percent to hit
a near two-month low on Monday as prices broke below a major
upward trend, but the metal could rebound on near-term
technical support, analysts said.
Weak U.S. housing sentiment and competition from other
asset classes such as government bonds, equities and industrial
commodities pressured the metal, which is used as an inflation
hedge. []
COMEX August gold futures have broken below a major
up-trend line dated back from a February low after suffering a
price breakdown on Friday, said Rick Bensignor, chief market
strategist at investment banking group Execution Noble.
(Graphic: http://link.reuters.com/wyv38m)
However, the bullish pattern remained intact based on
continuous one-month futures and spot gold despite August's
weakness, he said.
"Certainly, those looking to buy a pullback intending for
significantly higher prices in the future are close to the
major support line and a natural buying point," Bensignor
said.
Spot gold <XAU=> was at $1,181.80 an ounce at 1:30 p.m. EDT
(1730 GMT), against $1,193.10 late in New York on Friday. U.S.
gold futures for August delivery <GCQ0> settled down $6.30 an
ounce at $1,181.90.
Gold's 1.5 percent slip last week was due to a combination
of weak U.S. inflation data, outflow from the world's largest
gold exchange-traded fund and competition from government
bonds.
Analysts said some short-term investors were spooked by the
metal's failure to hold above $1,200 an ounce.
"Liquidation of long positions is weighing on the gold
price today," said BNP Paribas analyst Anne-Laure Tremblay.
"The liquidation is taking gold closer to closely watched
technical levels, and this has potentially initiated further
selling."
"Gold's lack of momentum has turned investors away from the
metal -- for now," she added. "This may well continue for a
while unless the (bank) stress tests results prove worrisome."
Wall Street was largely mixed despite its Friday sharp
losses. Oil was also flat after spiking as much as 2 percent in
early sessions. [] []
GOLD IGNORES IRELAND CREDIT CUT
A sovereign credit downgrade of Ireland by Moody's failed
to boost safe-haven demand for gold. []
"Some of the risk premium that has gone into gold,
primarily from the banking worries we have had, has been all
but silenced for now, so that is removing a bit of the support
we have had previously," said Saxo Bank analyst Ole Hansen.
"Liquidity is pretty poor, so it doesn't take much to move
this market," he added.
Gold has struggled to hold its ground since hitting a
record $1,264.90 an ounce in late June on concerns over euro
zone sovereign debt, which boosted interest in the metal as a
hedge against currency volatility.
Holdings of the world's largest gold exchange-traded fund,
New York's SPDR Gold Trust <GLD>, were steady at 1,314.211
tonnes on Friday. They have slipped more than 6 tonnes in July
so far but are still up more than 180 tonnes since the start of
the year.
Platinum <XPT=> was at $1,504.50 an ounce against $1,509,
and palladium <XPD=> was at $441.45 against $446.78.
Silver <XAG=> was at $17.53 an ounce versus $17.79.
Prices at 1:53 p.m. EDT (1753 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCQ0> 1181.90 -6.30 -0.5% 7.8%
US silver <SIU0> 17.543 -0.245 0.0% 4.1%
US platinum <PLV0> 1513.10 1.00 0.1% 2.9%
US palladium <PAU0> 443.90 -4.70 -1.0% 8.6%
Gold <XAU=> 1180.85 -12.25 -1.0% 7.7%
Silver <XAG=> 17.55 -0.24 -1.3% 4.2%
Platinum <XPT=> 1504.00 -5.00 -0.3% 2.6%
Palladium <XPD=> 441.45 -5.33 -1.2% 8.9%
Gold Fix <XAUFIX=> 1181.00 -9.25 -0.8% 7.0%
Silver Fix <XAGFIX=> 17.78 -47.00 -2.6% 4.6%
Platinum Fix <XPTFIX=> 1499.00 16.00 1.1% 2.3%
Palladium Fix <XPDFIX=> 447.00 9.00 2.0% 11.2%
(Additional reporting by Jan Harvey in London; Editing by Lisa
Shumaker)
