* Gold drops to support at $1,732/oz, EU summit eyed
* Euro softens on disappointment over progress on Spain
bailout
* Firmer than expected U.S. data weighing on gold this week
* Coming up: U.S. existing home sales for Sept at 1400 GMT
(Updates prices)
By Jan Harvey
LONDON, Oct 19 (Reuters) – Gold prices eased on Friday as
stock markets weakened and the dollar firmed a touch, staying on
track for a second consecutive weekly loss as the financial
markets awaited the conclusion of a European Union summit in
Brussels.
European leaders at the meeting made some progress towards
establishing a single banking supervisor for the currency bloc
on Thursday, but as expected talked little about immediate plans
for debt-laden Spain and Greece.
Spot gold was down 0.5 percent at $1,732.40 an ounce
at 1113 GMT, while U.S. gold futures for December
delivery were down $11.00 an ounce at $1,733.70.
Unexpectedly weak results from Google dragged down equities,
while the euro fell 0.1 percent against the dollar as a
perceived lack of progress on a Spanish bailout request curbed
demand.
That weighed on gold, which becomes more expensive for
holders of other currencies when the dollar firms.
“The EU leaders’ summit delivered very little except the
banking union, there is nothing to suggest that the euro will be
stronger than the dollar going forward, and that’s the problem,”
VTB Capital analyst Andrey Kryuchenkov said.
“There are all relative trades and it’s about who is ahead
of the curve, the European Central Bank or the Fed, with
liquidity injections and inflation expectations.”
German Chancellor Angela Merkel said on Friday it would take
more than a couple of months to develop a new banking supervisor
for the euro zone.
Gold traders waited for fresh impetus from leaders at the EU
summit, and possibly U.S. economic data on September existing
home sales and weekly economic activity, due later in the day.
Stronger than expected U.S data has weighed on gold in the
last week by prompting some to question how far the Federal
Reserve will have to extend its planned quantitative easing
programme, a package of potentially inflationary stimulus
measures which has been a major driver of gold’s gains.
“The path of least resistance for gold appears lower, at
least in the near term,” HSBC said in a note. “We do not see a
compelling reason for sharply lower prices, but the market may
drift lower, as trading volume in recent days has been light.”
“In the absence of a convincing reason to rally, short-term
investors may take the opportunity to sell before the weekend,
especially if coming economic data continue to be positive.”
SUPPORT FOUND
From a technical perspective, gold has found support
at$1,732, a 23.6 percent retracement level of the rally from its
late May low of the year to its October high, and just above its
low for the week and 10-day moving average at $1,729.
“Gold has some support at $1,735 and again at the week’s low
at $1,729, but a failure here will likely send the yellow metal
spiraling downward, as many of the new longs will stop
themselves out,” Commerzbank said in a note.
Gold Fields, the world’s fourth largest bullion
producer, said on Friday that the striking workers at its KDC
West mine in South Africa have returned to work, ending a
month-long strike at the operation.
About 1,500 employees who did not report for work before
Thursday’s deadline were dismissed, but have until noon on
Friday to appeal against their dismissal.
Number three platinum producer Lonmin also
said its operations in South Africa were back to normal after
about 4,000 employees walked out a day earlier.
A wave of strikes has hit the South African mining sector
since unrest at Lonmin’s Marikana mine led to the police killing
of 34 miners on Aug. 16, the bloodiest such incident since the
end of apartheid in 1994.
Platinum prices have risen nearly 20 percent since the
violence broke out, but remain constrained by a dire demand
picture, particularly from the key European automotive sector.
Spot platinum was down 0.7 percent at $1,627.99 an
ounce, while spot palladium was down 0.7 percent at
$634.72. Silver was down 1.4 percent at $32.30 an ounce.
(Additional reporting by Clare Hutchison, editing by Anthony
Barker)
