Gold falls as physical demand lags, breaks 3-day rise

Gold products on sale are displayed at a shop in Hanoi June 11, 2013. REUTERS/Kham/Files

By Frank Tang and Jan Harvey

NEW YORK/LONDON (Reuters) - Gold fell more than 1 percent on Monday as lackluster physical buying prompted traders to cash in three days' gains, while early gains in equities dented bullion's safe-haven appeal.

Gains from the stock market diverted investment interest from gold, as the Dow and S&P 500 rose to record highs earlier in the session before equities investors took profits. (.N)

Bullion came under pressure from global economic optimism on signs of ambitious economic reform in China and the prospect of extended stimulus from the U.S. Federal Reserve.

Also weighing down on investor sentiment was continued decline in the holdings of SPDR Gold Shares, the world's largest gold-backed exchange-traded fund. (GOL/ETF)

"Until such time as financial investors - be they short- or longer-term-oriented - return to the market, gold and silver will find it hard to make any significant gains," said Eugen Weinberg, head of commodities research at Commerzbank.

Spot gold was down 1.3 percent to $1,272.54 an ounce by 3:39 p.m. EST (2039 GMT). The metal had gained almost 2 percent in the last three days.

U.S. gold futures for December delivery settled down $15.10 an ounce to $1,272.30, with trading volume about 40 percent below its 250-day average, preliminary Reuters data showed.

GOLD-BUYING WILTS

Gold dominated a stampede out of commodities in the week to November 12 as hedge funds and other speculative investors sold off more than $4 billion in U.S. futures and options contracts, data showed on Friday.

Gold demand from major consumers in Asia remained muted on Monday. Chinese premiums have fallen to about $5.50 an ounce from about $7.50 on Friday.

Prices are also suffering from a dearth of demand from India, which is set to be overtaken by China as the world's No. 1 gold buyer this year after Indian authorities increased import duties for the metal.

Among other precious metals, silver was down 1.9 percent at $20.37 an ounce, while platinum slipped 2.1 percent to $1,406.99 an ounce and palladium fell 2.1 percent to $714.83 an ounce.

3:39 PM EST LAST/ NET PCT LOW HIGH CURRENT

SETTLE CHNG CHNG VOL

US Gold DEC 1272.30 -15.10 -1.2 1269.20 1289.20 101,686

US Silver DEC 20.357 -0.370 -1.8 20.290 20.800 46,532

US Plat JAN 1411.00 -27.90 -1.9 1410.60 1442.00 9,074

US Pall DEC 716.75 -15.90 -2.2 716.00 733.40 6,805

Gold 1272.54 -17.12 -1.3 1270.73 1290.00

Silver 20.370 -0.390 -1.9 20.340 20.800

Platinum 1406.99 -30.50 -2.1 1412.50 1439.00

Palladium 714.83 -15.47 -2.1 719.09 729.75

TOTAL MARKET VOLUME 30-D ATM VOLATILITY

CURRENT 250D AVG CURRENT CHG

US Gold 113,447 189,283 23.18 -1.01

US Silver 67,683 58,610 35.14 1.70

US Platinum 9,326 12,978 20.36 0.00

US Palladium 9,158 5,806

(Additional reporting by A. Ananthalakshmi in Singapore; Editing by Anthony Barker, Marguerita Choy and James Dalgleish)