1st LD Writethru: Gold down on technical trading despite weaker U.S. dollar

Gold futures on the COMEX division of the New York Mercantile Exchange fell Tuesday as technical trading outweighed the support from the falling U.S. dollar.

The most active gold contract for February delivery lost 6.5 U.S. dollars, or 0.60 percent, to settle at 1,074.1 dollars per ounce.

Technical trading and low volume were the features of the day, putting pressure on gold as traders prepare to leave for the long Christmas weekend. This came despite weakness in the U.S. dollar.

A report issued by the U.S. Department of Commerce Tuesday showed the country's Gross Domestic Product reading came in at an expected rate of 2 percent, keeping gold trading within a narrow range. Analysts note that inventory growth was revised lower to 85.5 billion dollars compared to the initial reading of 90.2 billion dollars.

Gold was given support as a report released by the National Association of Realtors Tuesday showed existing home sales in November falling by 10.5 percent to a much lower-than-expected annualized sale rate of 4.760 million units. Analysts note that new rules for the closing of home sales may have artificially depressed home sales during the month of November, but the figures are likely to improve in December due to the delay in closes.

The precious metal's price was put under further pressure as analysts believe the market remains unsure of when the next rate hike will occur.

Analysts believe the goal of the Fed is to soak up some of the banks' 2.5 trillion U.S. dollars of excess reserves as the U.S. economy begins to recover. Banks become more willing to take risks in a bullish economy, and as a result could potentially release some of their excessive reserves, flooding the economy with cash, causing inflation.

The long-term trend for gold remains strongly bearish as the Fed interest rate increase in December came despite expectations for a delay in the rate hike until 2016. An increase in the Fed's interest rate drives investors away from gold and towards assets with a return, as the precious metal bears no interest. Until the December meeting of the Federal Open Market Committee there had not been an increase in the Fed's interest rate since June 2006, before the beginning of the American financial crisis.

Silver for March delivery fell 0.1 cents, or 0.01 percent, to close at 14.314 dollars per ounce. Platinum for January delivery dropped 8.3 dollars, or 0.94 percent, to close at 873 dollars per ounce. Endit