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COMEX gold falls on profit-taking despite weak data

NEW YORK, July 29 (Reuters) - COMEX gold prices dropped Tuesday morning despite unexpectedly weak confidence data, a down dollar and declining stock market, and traders, who were befuddled at the drop, attributed it to profit-taking as the steep run-up in recent sessions began to consolidate.

"Many of the people I talk to are somewhat confused by the action, but others said they are seeing some profit-taking after gold's sharp gains," said one New York broker.

August gold futures on the New York Mercantile Exchange's COMEX division was down $2.90 at $362.00 an ounce, after surging a day earlier to its highest level since June 6. Tuesday's August range ran between $361.40 and $365.40.

Some of the decline in August futures was chalked off to rollover business as December will soon become the benchmark contract. Wednesday will be the last trading day for August gold. Many traders are therefore focusing on December futures which fell $1.50 to $365.10 an ounce.

COMEX gold volume was seen at 22,000 lots at 1000 EDT.

U.S. consumer confidence suffered a sharp and unexpected decline in July as worries over rising unemployment took a heavy toll, according to the Conference Board's gauge.

The euro changed hands at $1.1528/33 on Tuesday, as players pushed it back toward session highs at $1.1537 after the gloomy confidence report was released. The euro's Tuesday low against the dollar was $1.1454.

Traders said many gold players had used the euro's advance on the dollar as a barometer for driving gold's gains. A stronger euro makes dollar-denominated gold attractive for European investors. Some players were at a loss to explain why the reverse relationship had suddenly pervaded gold trade.

In addition, U.S. equities, which started Tuesday in the plus column, sold off sharply on the steep drop in sentiment.

In buy-the-rumor-sell-the-fact trade, some players may have unloaded some of the long gold positions they took on in the last week to grab profits as the dreary confidence report was released.

"These (confidence) numbers indicate that the economy is not really rolling the way everyone expected and has attracted some liquidation as the (gold) market is reviewing its overall perspective of the economy," said one dealer.

Spot gold at $361.60/2.25 was down from $364.90/5.40 late Monday. London dealers fixed the afternoon spot reference price at $363.50.

Traders were even more perplexed about the recent sharp gains in silver. On Monday, spot silver surged to its highest level since late February 2000. Some analysts had predicted the rally would quickly run out of steam, and need to correct.

COMEX September silver dropped 4.50 cents to $5.155 an ounce, still at a long-term chart in its $5.035 to $5.18 range. On Monday, September silver hit an all-time contract high at $5.23.00. COMEX estimated about 7,000 silver contracts traded by 1000 EDT.

Spot silver was quoted lower at $5.12/5.14 versus $5.18/5.20 late Monday. Silver was fixed at $5.02.

October platinum futures fell $2.40 to $694.00 an ounce. Spot platinum was quoted unchanged at $697.00/702.00 an ounce.

September palladium gained $0.50 to $174.00 an ounce. Spot palladium was quoted up at $171.00/176.00.