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Gold Falls to 16-Week Low as Palladium Below Highest Since 2011

May 29 (Bloomberg) -- Gold fell to the lowest level in 16 weeks as signs of an improving U.S. economy and stronger dollar curbed demand for the metal. Palladium traded below the highest price since 2011.

Gold slid 28 percent last year on expectations the Federal Reserve would cut debt buying as the economy strengthens. The dollar was near a three-month high against the euro today after data this week showed better-than-expected U.S. durable goods orders and on expectation that the European Central Bank will add stimulus.

European Union leaders meeting in Brussels on May 27 decided to put off further sanctions on Russia after President Vladimir Putin showed a willingness to work with Ukraine’s new leader and pulled back some troops from the border. Russia is the top supplier of palladium, which advanced 16 percent this year as workers went on strike in South Africa, the second- largest producer of the metal.

“We expect gold to struggle against the backdrop of improving U.S. macro-economic fundamentals,” Abhishek Chinchalkar, an analyst at Mumbai-based AnandRathi Commodities Ltd., said in a report. A stronger dollar also curbed demand for gold and lower bullion prices haven’t encouraged more purchases from top-buyer China, he said.

Gold for August delivery slipped 0.6 percent to $1,252.50 an ounce by 7:37 a.m. on the Comex in New York. It reached $1,251.40 earlier today, the lowest since Feb. 4, and is set for a 3.3 percent drop this month. Futures trading volumes were 47 percent more than the average for the past 100 days for this time of day, according to data compiled by Bloomberg.

Bullion for immediate delivery fell 0.5 percent to $1,252.47 in London, according to Bloomberg generic pricing.

RSI Level

Gold futures’ 14-day relative-strength index was at 31.1 today, near the level of 30 that suggests a potential rebound to some analysts who study technical charts.

Pro-Russian rebels downed a military helicopter in eastern Ukraine, killing 13 troops and a general, as an aide to Putin accused the U.S. of pushing the world toward war through proxies in Kiev. With G-7 leaders scheduled to meet next week in Brussels, Germany doesn’t see any reason to extend sanctions to broader economic sectors for now, according to Steffen Seibert, German Chancellor Angela Merkel’s chief spokesman.

“The background support from Ukraine seems to be fading,” said Sun Yonggang, a macroeconomic strategist at Everbright Futures Co. in Shanghai.

Silver Price

Silver for July delivery fell 1.2 percent to $18.84 an ounce in New York, set for a third monthly drop. Platinum for July delivery dropped 0.9 percent to $1,449.80 an ounce. Palladium for September delivery lost 0.5 percent to $836.70 an ounce. It reached $845 yesterday, the highest since Aug. 1, 2011, and is heading for a fourth month of gains in the longest such run since January 2011.

Holdings in platinum- and palladium-backed exchange-traded products reached records yesterday, data compiled by Bloomberg show. More than 70,000 mine workers downed tools in January in South Africa, the largest producer of platinum. Government-led talks between the mining companies and the main union in the country will take place today.

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