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Gold Drops From 3-Week High on U.S. Outlook as Palladium Slips

April 15 (Bloomberg) -- Gold fell from a three-week high in New York on speculation that signs of an improving U.S. economy will curb demand for a haven. Palladium declined from the highest price since August 2011.

The Bloomberg Dollar Spot Index advanced for a third day before data that may show a manufacturing gauge rose for a second month and after a report yesterday showed retail sales increased more in March than economists forecast. Palladium futures slipped as much as 2.4 percent today, after climbing the previous five sessions.

Gold gained yesterday as tension in Ukraine sparked concern that more sanctions will curb raw-material supplies from Russia, the largest palladium producer. Last year, gold futures slid 13 percent in the two sessions through April 15, the biggest two- day slump in three decades and marking bullion’s entry into a bear market. The commodity has rebounded 8.5 percent this year.

The metal has been “pressured by very strong retail sales data from the U.S.,” Abhishek Chinchalkar, an analyst at Mumbai-based AnandRathi Commodities Ltd., wrote in a report. “We expect the upside to be checked by weak physical demand from China and evidence that the U.S. economic recovery is gaining momentum. At the same time, we believe the downside to be protected by lingering worries that the Ukrainian situation could spiral out of hand.”

Gold for June delivery fell 1.7 percent to $1,304.80 an ounce by 7:50 a.m. on the Comex in New York. It lost as much as 1.9 percent, the biggest intraday drop since March 24, after reaching a three-week high of $1,331.40 yesterday. Futures volume was 40 percent above the average for the past 100 days for this time of day, data compiled by Bloomberg showed. Bullion for immediate delivery declined 1.8 percent to $1,304.42 in London, according to Bloomberg generic pricing.

Ukraine Crisis

Ukraine began a military-backed “anti-terrorist” operation in its eastern border region where militants have seized buildings as Russia’s Prime Minister Dmitry Medvedev said the country risks spiraling into civil war. The U.S. and the European Union also deliberated deepening sanctions against Russia, which they blame for stoking the unrest, as U.S. President Barack Obama and Vladimir Putin remained at odds over who was at fault.

“Gold benefited from the escalation in tension between Russia and the Ukraine, but upbeat U.S. economic data put a damper on the safe-haven rally,” Sun Yonggang, a macroeconomic strategist at Everbright Futures Co., said from Shanghai today.

Bullion will decline to $1,025 an ounce at the end of December as the Federal Reserve withdraws stimulus amid an improving economy and inflation remains subdued, Justin Smirk, senior economist at Westpac Banking Corp., said at a briefing in Singapore today. He’s the second-most accurate gold forecaster over the past two years, data compiled by Bloomberg show.

Platinum

Silver for May delivery fell 1.6 percent to $19.68 an ounce in New York. Platinum for July delivery dropped 1.6 percent to $1,443.90 an ounce, after reaching $1,471.50 yesterday, the highest since March 17. Palladium for June delivery slipped 2 percent to $795.25 an ounce. It rose to $817 yesterday, the highest since August 2011.

Palladium advanced 11 percent this year as the threat of disruption to Russian exports compounded concerns about supply spurred by a miners’ strike in South Africa, the second-biggest producer, that started in January.

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