Gold snaps rally on profit booking; hovers near 3-1/2 month high

Tags: News
Gold drifted lower on Tuesday as traders took profit from recent gains, but the safe-haven metal still held near 3-1/2 month highs due to a weaker U.S. dollar and concerns over global economic growth.

Bullion is up 10 percent this year - after losing nearly a third of its value in 2013 - as outflows from gold-backed funds slow and equities weaken due to emerging market jitters.

Gold had gained three straight sessions through Monday, following weak U.S. economic data that also boosted silver.

Spot gold slipped 0.4 percent to $1,323.05 by 0335 GMT, after hitting $1,332.10 earlier in the session - its highest since October 31.

Silver also fell but wasn't too far from a 3-1/2 month high of $21.96 hit on Monday.

"Both gold and silver have good momentum, so expect the dips to be shallow and supported," said one Hong Kong-based precious metals trader. "Realistically expect a pullback that will run into good buying before the next move higher."

The trader said some investors began selling after prices pushed through Monday's highs. Buying will return between $1,305 and $1,318, he said.

Asian shares mostly eased after solid gains in recent sessions, while the dollar was near six-week lows against a basket of currencies.

Investors have been seeking shelter in gold after a string of U.S. data showed the world's largest economy had been hit by cold weather and fears of slowing growth in China.

Gold is often seen as an alternative investment to risky assets such as stocks and is considered a haven during times of economic uncertainty.

In the physical markets, Indian Finance Minister P. Chidambaram said on Monday he will look into relaxing gold imports curbs, but won't let the country's current account deficit balloon.

To reduce its trade deficit, India introduced import restrictions last year that have slashed official imports of the metal, though smuggling has increased.

In China, premiums of 99.99 percent purity gold on the Shanghai Gold Exchange eased to about $5 an ounce from Monday's $7 as buyers took a breather after the price rally.

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