NEW YORK, Jan 21 (Reuters) - COMEX gold was lower Wednesday morning on news that Germany wanted to unload 600 tonnes of bullion if a Central Bank gold sales agreement was renewed and U.S. housing data showing a rebounding economy.
Housing starts rose 1.7 percent in December as builders broke ground at the fastest rate since 1984. This dulled gold's safe-haven shine, although investors remain comfortable with gold near 15-year highs with the dollar still on the ropes.
At 10:20 a.m. EST (1520 GMT), February gold was down $4.80 at $408.10 an ounce, trading $413.60 to $407.50, arresting Tuesday's bounce from Friday's one-month low at $405.70.
The Bundesbank said it wanted an option to sell bullion from its reserves if the current agreement, which limits sales by 15 European central banks to 400 tonnes a year, is renewed for five more years when it expires in September.
Germany is the second largest holder of gold after the United States. Except for a small amount to mint gold coins, it did not sell under the current pact, which had been announced in Washington in September 1999. Under Wednesday's request, it would take up to 120 tonnes per year of the renewed quota.
"This isn't really new news," said a bullion trader. "I don't think it really reacted to that. If anything, we seemed to come off after the housing starts."
The dealer said the market was expecting the pact to be renegotiated before September, possibly with more countries participating and a new annual limit of perhaps 450 tonnes.
"You've got a range that you're comfortable with. If you are out of the range then you are a little upset," he said.
Austrian Central Bank Governor Klaus Liebscher on Monday put the expected renewal of the Central Bank Gold agreement back on front burner, saying he was "very optimistic" that Europe's central banks will renew it.
"The Buba news comes as no great surprise to the market as they have been hinting for quite some time that they are interested in reducing their gold holding," wrote Societe Generale analysts in New York on Wednesday. "The market is more interested to see who else will be requesting a quota -- France or Italy perhaps?"
A firmer euro added some support overnight, muting the reaction to the Bundesbank. The currency rose to $1.2600/06 early Wednesday from $1.2576/82 at the close, making gold cheaper for European investors.
Spot gold was quoted at $407.90/8.50, down from the close at $412.00/2.75 and London's morning fix at $411.25.
March silver was off an even steeper 19.3 cents at $6.13 an ounce, trading from $6.37 to $6.10 in a continued pullback from last week's 6-year high at $6.795.
Silver posted a bigger gain to start the year than did gold, as funds thought gold looked vulnerable and diverted buying to silver, which had underperformed much of 2003 and also had the allure of an industrial metal in an economic recovery.
"We had some fund selling in gold and in silver the last couple of days," said a floor broker, who added that some of these silver/gold plays were being unwound. "You've seen a lot of gold/silver ratios going on too."
Spot silver was down at $6.11/13 from the close at $6.30/32. The fix was $6.30.
NYMEX April platinum gained $4.30 to $856.20 an ounce. Spot closed at $860.00/865.00.
March palladium rose $5.10 to $224.75 an ounce. Spot last fetched $217.50/223.50.