JULY 26, 2010, 2:45 P.M. ET.

PRECIOUS METALS: NY Gold Futures Sink As Market Worries Ebb

By Matt Whittaker Of DOW JONES NEWSWIRES NEW YORK

Gold futures fell slightly as stronger U.S. housing data and a brighter corporate outlook Monday followed expected European bank stress test results last week to sap the fear factor that recently drove the yellow metal to record highs.

The most-actively traded gold contract, for December delivery, fell $4.60, or 0.4%, to settle at $1,187 an ounce on the Comex division of the New York Mercantile Exchange.

"You're seeing people come out of some of the safe-haven instruments and back into equities," said Charles Nedoss, senior market strategist with Olympus Futures in Chicago.

In addition to gold, prices for U.S. Treasurys, also perceived as a safe-haven investment, were down following government data showing new home sales increased 23.6% in June to an annual rate of 330,000, beating economist expectations of a 3.7% gain to 311,000. The data supported industrial commodities like copper, while the Dow Jones Industrial Average was up 0.6% shortly after gold closed.

An optimistic tone from economic bellwether FedEx Corp. (FDX), which cited a continuing economic recovery in boosting quarterly and full-year financial forecasts Monday, added to the lessened desire for gold as a refuge, said Dan Cook, Chicago-based senior market analyst with brokerage firm IG Markets.

"The investment community is trying to get a feel for where to go from here," he said.

Gold prices have pulled back below $1,200 in recent days--even as commodities with wider industrial applications have gained--as fears about another economic slowdown have waned. The metal is often viewed as a so-called safe-haven investment because of the thinking that it will retain its value more strongly than some other commodities, equities and currencies. Gold had gained rapidly amid concerns that included the European debt crisis.

But on Friday, only seven of 91 European banks failed tests designed to probe how they would do given various scenarios. That was largely in line with expectations, removing some of the fear premium that had sent gold above $1,260 in June.

Sub-$1,200 prices may be helping demand for gold in Asia, where jewelry made of the metal is not only bought for adornment but also as an investment. The typical buying season in India, the world's largest gold market, still lies ahead, during a time of religious festivals and weddings.

"Maybe some physical buying is a positive," said Tom Pawlicki, analyst with MF Global in Chicago.

Gold's 100-day moving average and long-term support trendlines lie within the $1,174-$1,181 range, said Walter de Wet, a precious metals analyst at Standard Bank in London.

"In the physical market, buying interest is providing support around this crucial technical range for gold," he said.

Jewelry makes up more than two-thirds of global gold demand, according to the World Gold Council, a mining industry group.

Another possible slight positive for gold prices is news of declining production in Russia, Pawlicki said.

Russian gold production fell 3.48% year-on-year to 74.661 metric tons in the January-June period, according to figures released by the gold producers' union Monday. Although gold output from scrap and from other metals' smelting increased, gold mining output dropped.

Other precious metals traded in New York rose Monday.

Silver futures gained ground along with copper prices, which rose 1.2% on the Comex. Although silver is a precious metal that often trades in tandem with gold, it is also more widely used for industrial applications than is the yellow metal. Comex September silver rose 9.9 cents, or 0.5%, to settle at $18.20 an ounce.

Platinum futures rose on supply news from South Africa, the world's largest producer of the metal.

Anglo Platinum Ltd. (AMS.JO), the world's largest producing company, produced 5% less refined platinum than a year ago, although Chief Executive Neville Nicolau said Monday the company's output target for the year remains unchanged.

Nicolau had earlier this year said the company had the flexibility to ramp up 2010 production to 2.7 million ounces, but Monday said that wouldn't be appropriate given the recent "downshift" in the global economic recovery.

Also in South Africa, workers at Impala Platinum Holdings Ltd. (IMP.JO) will vote Tuesday on whether to stage a strike to pressure the mining company to meet wage demands, the country's largest trade union said.

Nymex October platinum rose $13, or 0.8%, to $1,555.80 an ounce while September palladium gained $8.25, or 1.8%, to settle at $475 an ounce.

Settlements (ranges include open-outcry and electronic trading): London PM Gold Fix: $1,183.50 ; previous PM $1,190.50 Spot gold at 1:36 p.m. ET: $1,184.72, down $4.33; Range: $1,179.85-$1,194.65 Dec gold $1,187.00, down $4.60; Range $1,182.40-$1,198.40 Sep silver $18.20, up 9.9 cents; Range $17.975-$18.270 Oct platinum $1,555.80, up $13.00; Range $1,542.00-$1,559.80 Sep palladium $475.00, up $8.25; Range $466.85-$479.00 -By Matt Whittaker, Dow Jones Newswires; 212-416-2139; matt.whittaker@dowjones.com

(Robb M. Stewart contributed to this report.)

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