NEW YORK, Sept 26 (Reuters) - Prospects for soon stretching recent gains in COMEX gold to new highs dimmed Thursday after hopeful economic data sent investors back into blue chip stocks, stranding bullion at the bottom of a recent $320-$330 range.
News that the Swiss National Bank will sell another 283 tonnes of gold in the next 12 months, part of an ongoing program to halve its 2,600-tonne bullion reserve, also helped pull the rug out from bullion.
December gold settled down $1.90 at $321.70 an ounce, after trading $324.60-$319.80. That followed Wednesday's $3.60 retreat and further corrected the rally to a 13-week high at $329.30 on Tuesday. At that point gold was within reach of the 2-1/2 year highs over $330 on June 4.
"There were a number of factors out there that people should be aware of. Number one, you had strength in the stock market," said a commodity broker. "Number two, you had the Swiss announcement that they were going to sell some more -- not a lot."
He continued, "I think also it was a follow-through from the technical failure early in the week."
The expiration of over-the-counter options kept movements in check in early trade. But estimated volume ended up a busy 46,000 contracts.
Spot gold was at $320.40/90, off from $322.00/50 at Wednesday's close. Bullion dealers fixed London's afternoon spot reference price at $319.60.
Though tech stocks struggled, the Dow Jones industrial average was up 85 points in the afternoon. It added to Wednesday's 158 point bounce, buoyed by a fall in weekly claims for unemployment benefits, a smaller than expected 0.6 percent fall in August durable goods orders and a 1.9 percent surge in August new home sales to a new record.
"It was pretty much what was behind it -- yesterday's rally, today's rally and better economic numbers," said James Pogoda, a vice president of precious metals at Mitsubishi International Corp. "It seemed to hold up a bit before options expirations then seemed to crack afterward."
Money managers dumped gold equities. The XAU index of gold and silver mining stocks lost almost 5 percent, a sell signal for gold traders who see the XAU index as a leading indicator.
But there was reluctance to give up on gold as insurance, with equities near multiyear lows hit early this week on worries about earnings, the economy and U.S. preparations for a war to disarm Iraq.
"Paper is still burning, the equity rally-relief of the last 48 hours notwithstanding," wrote Gregory Weldon, publisher of Morning Metal Monitor. "Our 'bonfire of the equities' theme stands, as does our secular bullion bullishness."
December gold found support in the psychological $320 area.
A break below the $318 technical level, the 100-day moving average, could prompt more funds to reject the longs booked in recent weeks.
"Basically it's long liquidation," said a chief dealer at a bullion trading firm. "Certainly the market felt very long to me as we struggled up to the $325 area. Once we get past the September 30 quarter end we may see a little more activity from the producer area on the sell side."
Longs also threw in the towel on silver. December silver dropped 7.5 cents to $4.525 an ounce, trading from $4.61 to a three-week low at $4.50.
Spot silver was at $4.50/52, off from $4.58/60 late Wednesday. It fixed at $4.555 an ounce.
NYMEX October platinum slipped $1.20 to $558.40 an ounce. Spot platinum was last at $559/564.
December palladium was down $5.70 at $319.40. Spot palladium was indicated at $315/327.