US MIDDAY: gold falls

Gold fell early on Tuesday, on track to snap a three-day winning streak, amid selling prompted by lower crude oil and US equity markets and a spate of positive US economic data that eroded hopes of more US monetary easing.
Spot gold narrowed its losses by 1:18 pm EDT/17:18 GMT to $1,652.21 an ounce from $1,660.40 late Monday, having slid by nearly 3 percent so far this month. The COMEX April gold contract was down $20.1, or 1.2 percent at $1,647.1 per ounce. The yellow metal, which has been following riskier assets such as stocks, also fell after a disappointing US housing starts report.
"Money managers are reallocating capital into risk assets they had been shying away from, while liquidating some of their gold holdings (as) the economic picture painted in the first quarter has given reason to believe growth is on the right path," said Carlos Perez-Santalla, a trader at PVM Futures in New York.
Adding to the negative mood in gold was a sharp rise in benchmark 10-year US Treasury yields, which have gained more than a third of a percentage point in less than a week. Both Treasury securities and gold tend to be sold when economic growth improves, traders said.
Gold's correlation with Treasuries has reversed in the last week, meaning the bullion price is now more likely to move in tandem with Treasury prices than against them. "It's very much intraday movements related to the ups and downs of the dollar, which is setting the agenda for the time being," said Ole Hansen, senior manager at Saxo Bank.
The dollar gained against the euro and yen in quiet trade, while the Australian dollar tumbled on central bank hints of more room to ease and fears about China's growth. Lackluster physical and investment demand has pressured the metal, as a strike by India's jewellery industry entered a fourth day. They were opposing a sharp bullion import duty hike.
Gold losses were further sparked by declines in the world's largest gold exchange-traded funds. Holdings of gold in the world's major ETPs saw their largest one-day outflow in two months on Tuesday, falling by over 56,000 ounces to 70.843 million ounces.
Gold's 3 percent decline last week erased gains won in January on hopes of further US monetary easing. On Tuesday, a top Fed official said the US central bank has not yet decided whether to embark on a third round of quantitative easing, or QE3.
"We are going to see a bumpy ride over the coming weeks, but I think investors eventually will step up to the plate. Rising bond yields are not going to be looked upon lightly by the Fed and some kind of (central bank) action could be the result, which will support gold," said Saxo Bank's Hansen.
In late December, gold fell toward $1,500 an ounce, after a more than 20 percent drop from an all-time high above $1,920 in September. Gold is still up more than 5 percent this year. In other precious metals, silver fell by 3.8 percent to $31.96 an ounce, while US May silver futures were down 1.12 cents at $31.805. Platinum fell 1.5 percent to $1,649.24 an ounce, while palladium was down 2.1 percent to $687.05 an ounce.