Gold drops in Europe

Gold prices fell nearly 1 percent on Tuesday, with a breach of support near $1,605 an ounce triggering technical selling, after forecast-beating US retail sales data dampened speculation of another round of monetary easing and lifted the dollar. Platinum prices held onto gains, however, after the world's number three platinum miner Lonmin said it was closing all its operations in South Africa, which account for 12 percent of global supply, after violence at one of its facilities killed nine.
Spot gold was down 0.7 percent at $1,598.20 an ounce at 1316 GMT, while US gold futures for December delivery were down $11.40 an ounce at $1,601.20. Spot prices earlier fell nearly 1 percent to a low of $1,594.10. Gold came under pressure after data showed U.S retail sales rose in July for the first time in four months as demand rose broadly, from cars to electronics, in a sign that consumers could bolster third-quarter growth.
Positive signals on the economy could cut the chances of another round of gold-friendly stimulus measures like quantitative easing - printing money to buy bonds - expectations which have supported prices in recent months. "(The move was) absolutely technical. Traders want to be long, but not at any price," Saxo Bank vice president Ole Hansen said. "(There was a) huge jump in volume on the break below $1,605."
"Now we need to see what the response is. The last few sell-offs have been met by instant buying," he said. "Whether the US retail numbers diminish the chance of QE3 could be the short-term focus now, and has the potential to create a bit of headwind." The dollar erased early losses against the euro after the news, though it struggled for traction as financial markets digested the data. US stock index futures added to gains.
Among other precious metals, spot platinum was up 1.4 percent at $1,399.24 an ounce and spot palladium was up 1.1 percent at $575.97 an ounce. The platinum group metals outperformed after platinum producer Lonmin shut its South African operations after violence caused by a feud between rival unions killed nine people at its main mine. The clashes involve a struggle for membership between the dominant National Union of Mineworkers (NUM) and the upstart Association of Mineworkers and Construction Union (AMCU).
Police reinforcements including armoured vehicles were deployed at the Marikana operations about 100 km north-west of Johannesburg. Two policemen and two security guards were among those killed in the violence. Executives at Lonmin said all its shafts across the South African platinum belt were closed down with only essential services such as ventilation operating.
"Until the place is safe we don't want to talk about production," Lonmin Executive Vice President Barnard Mokwena told a news briefing at Marikani. However, platinum's discount to gold held above $200 an ounce as concerns over demand continued to weigh on the metal, which is down nearly 1 percent this month and off nearly 20 percent from a February high. Silver was down 0.1 percent at $27.75 an ounce.