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Gold in New York fell from a two-week peak early Thursday as stiff resistance at $520 an ounce capped a prior rally, but bullishness for 2006 continued to offer support in thin, year-end trade, traders said.

Other precious metals -- silver, platinum and palladium -- retreated with gold as well, due to a lack of fund buying following a broad-based rally since last week.

By 10:24 am EST, February delivery gold sank $2.70, or 0.5 percent, to $513.60 an ounce at the New York Mercantile Exchange's COMEX division, trading from $520.10 to $513.10.

Dealer selling hit the yellow metal after prices topped out just above $520 over the last two days, after a recovery from a one-month low of $492.30 last week, said traders.

The slide followed a rise to fresh two-week highs in Tokyo gold futures and spot gold overnight amid positive technical and fundamental factors in the market. COMEX and NYMEX metals are set to close early at around noon on Friday and remain shut on Monday for the New Year's market holiday.

Futures were unable to sustain support from a 10.5 percent drop overnight in COMEX gold warehouse stocks. Inventories fell 680,603 ounces to 6,497,818 ounces on Wednesday afternoon.

Gold in the last six months also has broken free from its typical inverse relationship to the dollar, enabling factors like tight supply and strong demand to hold sway over prices.

Spot gold eased to $511.40/512.10 an ounce, from Wednesday's New York close at $513.70/4.40. Thursday's afternoon fix in London by bullion dealers was at $513. On December 12, bullion surged to its highest level in almost 25 years at $540.90.

March silver lost 9.5 cents to stand at $8.84 an ounce, moving from a two-week high at $9.03 to $8.74. Spot silver fetched $8.76/79 an ounce, below its last close of $8.84/87. It fixed at $8.905.

NYMEX January platinum shed $9.10 at $962 an ounce. January-into-April rollover has been the main feature to trading before first notice day for delivery next week. Spot platinum was quoted at $960/964 an ounce. Illiquid March palladium dropped $10 to $255 an ounce. Spot traded at $249/253.

Copyright Reuters, 2005


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