Gold falls as momentum weakens, eyes on FOMC
* China's trade deficit weighs, eyes on FOMC Tuesday* Specs cut gold futures net longs most since August* Gold exchange-traded product holdings hit record high
NEW YORK/LONDON - Gold fell onMonday as data showing a massive drop in money managers bullish position on gold and silver futures prompted selling.
Bullion prices, which were higher the previous session, fellalong with oil as news about China's biggest trade deficit in adecade stirred economic worries. The market was already underpressure after encouraging U.S. employment data last Fridaydashed hopes of further U.S. monetary stimulus.
Buying sentiment turned more cautious on Monday after U.S.data showed that net long futures positions held by moneymanagers, including hedge funds, fell 20 percent, the biggestone-week drop since August. Bullish bets in silver futures alsotumbled.
"Speculative investment demand has certainly been a positivefactor behind the precious metals' run. Liquidation of it takesaway some of the support behind this market" said David Meger,director of metals trading at Vision Financial Markets.
"In the near term, I wouldn't be surprised to see a littlefurther consolidation or sideways movement," he said.
Spot gold fell 0.5 percent to $1,700.10 an ounce by1:51 p.m. EDT (1751 GMT), after Friday's surprise $40 rally fromintraday lows after a third straight monthly growth in U.S.employment.
U.S. April gold futures settled down $11.70 at$1,699.80 an ounce, with trading volume in line with its 30-dayaverage, preliminary Reuters data showed.
The gold market will closely monitor Tuesday's policystatement from the Federal Reserve Open Market meeting whichwill likely discuss the need of further economic stimulus afterthe encouraging U.S. job report.
"The market had maybe overly anticipated QE3 into the goldprice, it had factored in too much and it maybe what we saw lastweek was something of that being extracted back out of the price- diminished expectations of QE3," James Steel, an analyst atHSBC said.
Flows of metal into exchange-traded products, a barometer oflonger-term investor demand, rose for a ninth week in a row lastweek, up 71,845 ounces to 70.759 million ounces, bringing totalnet inflows so far this month to nearly 320,000 ounces.
(Reuters)