Gold drops after 3 weeks of gains

Gold declined after three weeks of gains as a technical gauge signaled a reversal and on concern that higher prices will hurt physical demand in Asia. Silver, platinum and palladium fell.

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Bullion for immediate delivery lost as much as 0.4% to $1,318.79 an ounce and was at US$1,321.57 at 10.07 am in Singapore. Prices reached $1,332.45 on Feb 18, the highest level since Oct 31. The 14-day relative strength index was at 68.9 on Feb 21, close to the level of 70 that signals to those who study charts that prices may be set to reverse.

Gold is headed for a second monthly advance after weaker- than-expected data spurred concern that the US recovery may be losing momentum just as the Federal Reserve scales back asset purchases. Sales of previously owned U.S. homes dropped in January to the lowest level in more than a year amid harsh winter weather. Deadly protests in Ukraine and Thailand hurt emerging-market assets already weakened by the cuts to stimulus, increasing demand for a haven.

“It remains to be seen if recent weakness in US economic data is really due to the weather or if it’s something investors should be more concerned with,” said Sun Yonggang, a Shanghai- based macroeconomic strategist at Everbright Futures Co. “Gold is getting some flows from risks in emerging markets but is looking increasingly overbought. Higher prices also turn off physical buyers, the most sensitive part of demand.”

SPDR Holdings

Assets in the SPDR Gold Trust, the biggest exchange-traded product backed by bullion, rose for the first time in a week on Feb 21, while volumes for Shanghai’s benchmark spot contract fell that day as metal for immediate delivery traded at a discount to London prices.

Gold for April delivery declined 0.2% to $1,321.30 an ounce on the Comex. The net-long position rose 31% to a 16-week high of 90,942 futures and options in the week to Feb 18, US Commodity Futures Trading Commission data show.

Silver dropped as much as 1.3% to $21.5224 an ounce and was at $21.6104. Last week, prices posted a third weekly gain in the longest such run since August.

Platinum dropped 0.3% to $1,424.69 an ounce, while palladium declined 0.5% to $736.90 an ounce.

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