PRECIOUS-Gold drops 1 pct on technical selling, HSBC cut
* Failure to break 50-day MA dents gold investors' confidence
* HSBC analyst shifts allocation out of gold
(Adds fresh quotes, prices, changes byline, previously LONDON) NEW YORK, Jan 24 (Reuters) - Bullion is on track for its biggest one day drop in three weeks falling 1 percent on Thursday after repeatedly failing to break above its 50-day moving average at under $1,700. Investor confidence in gold was further eroded when Global bullion behemoth HSBC, said in a note that it had halved its exposure to gold, shifting its inflation hedge to U.S. Treasury Inflation-Protected Securities (TIPS). A recovery in gold prices earlier this week ran out of steam as the metal hit strong overhead resistance between $1,690 and $1,700. Gold has failed to breach that level in the last five sessions in a row. (Graphic: http://r.reuters.com/kad55t) "There are two important areas of resistance gold encountered this week and so far unable to break above, which are the multimonth downward trendline, the 50-day moving average and the recent highs," said Adam Sarhan, CEO of Sarhan Capital. "I expect the recent trading range between $1,695 and $1,625 to continue," he said. Spot gold hit a low of $1,664.69, just above its 200-day moving average. It was down 1 percent at $1,668.36 an ounce by 1:17 p.m. EST (1817 GMT) U.S. COMEX gold futures for February delivery were down $18.60 at $1,668 an ounce. Trading volume was on track to finish above with its 250-day average, preliminary Reuters data showed, partially boosted by February-April contract rollover ahead of February's first-notice day on Jan. 31. In the note, HSBC took a much less favourable view of the metal as an inflation hedge. The bank attributed the move to a decline in systematic risks, as the probability of a euro zone breakup fell and "the most apocalyptic" of U.S. fiscal outlooks was avoided. HSBC cut gold's weight in its 3-year strategic portfolio by 8 percent to 7 percent, and by 9 percent to 7 percent in its tactical portfolio. Gold also came under pressure from the U.S. House of Representatives' decision late on Wednesday to extend the U.S. debt ceiling limit to May 19. The move avoided a repeat of a 2011 standoff between Washington lawmakers that sent gold to record highs at $1,920.30 an ounce, analysts said.
INDIAN DEMAND LANGUISHES Physical buyers in main gold consumer India reported that they were struggling to sell stocks despite offering discounts to buyers, as the market digested a 50 percent hike in import tax. Holdings of the world's largest gold-backed exchange-traded fund the SPDR Gold Trust, fell 1.8 tonnes on Wednesday, bringing its overall outflow for the year to 16.7 tonnes. More positively for prices, the Russian central bank's First Deputy Chairman Alexei Ulyukayev said on Thursday Russia will keep buying bullion. The bank said in 2005 it planned to lift gold to 10 percent of forex reserves, a level it is approaching after buying around 550 tonnes of gold in the last six years.
Among other precious metals, silver was down 1.9 percent at $31.64 an ounce, while platinum eased 0.3 percent to $1,678.99 an ounce and palladium edged up 0.1 percent to $724 an ounce. Prices at 1:17 p.m. EST (1817 GMT)
LAST NET PCT YTD CHG CHG CHG US gold 1668.00 -18.60 -1.1% -0.5% US silver 31.685 -0.754 -2.3% 4.8% US platinum 1683.90 -7.90 -0.5% 9.4% US palladium 726.55 0.35 0.1% 3.3%Gold 1668.36 -16.78 -1.0% -0.4% Silver 31.64 -0.60 -1.9% 4.4% Platinum 1678.99 -5.26 -0.3% 9.2% Palladium 724.00 0.53 0.1% 3.1%Gold Fix 1671.00 -6.00 -0.4% 0.4% Silver Fix 31.85 -38.00 -1.2% 6.3% Platinum Fix 1680.00 7.00 0.4% 10.3% Palladium Fix 722.00 2.00 0.3% 3.3%
(Additional reporting by Clara Denina and Jan Harvey in London; editing by Leslie Gevirtz)