Gold holds near NY levels, $700 seen elusive

SINGAPORE, Apr 25 (Reuters) Gold on Wednesday held near levels seen in New York, but a 2 percent drop in oil prices on Tuesday limited the upside and the market lacked fresh impetus to approach $700 an ounce.

Spot gold was at $684.00/684.50 an ounce by 0408 GMT, hardly changed from $684.10/684.60 late in New York on Tuesday, when it hit an intraday low around $680 an ounce.

''There's some sort of long liquidation, while bargain hunters seem to be waiting for the price to drop to $680. Selling in TOCOM has also limited the upside,'' said a dealer in Hong Kong.

''Declines in copper also sent bearish sentiments,'' said the dealer, referring to Tuesday's falls in copper futures on the London Metal Exchange.

Gold rose to an 11-month high of $693.60 on Monday, matching the level hit on Friday, on the back of firmer crude oil which raises gold's appeal as a hedge against inflation.

But a failure to break through the next resistance of $695, as well as a drop in crude oil, ignited selling from investors, keeping the price from moving closer to $700 -- a level last seen in May 2006.

''Some of the retail investors are a bit nervous. I guess breaking $700 is not going to come around soon. Sometimes, when the expectation is too high, it just doesn't happen,'' said a dealer in Singapore.

''We may see another day of a downside. We may see $680 for gold and $13.70 for silver but generally, there's a lack of activity,'' he said.

U.S. crude futures steadied on Wednesday after falling 2 percent the previous day as the market awaited weekly oil inventory data for the United States, the world's main consumer, due later in the day.

The benchmark most-active April 2008 TOCOM gold contract , which debuted on Wednesday, was at 2,633 yen per gram after opening at 2,630 yen.

''I think the market is already long,'' said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong, who expected gold to drop to $680 and $675.

The dollar held near its lowest level in two years against the euro amid views that U.S. economic growth will keep slowing.

The euro was at $1.3625 -- not far from the $1.3644 high hit on Tuesday -- after U.S. existing home sales posted their biggest monthly drop in 18 years and consumer sentiment hit an eight-month low, fuelling speculation the Federal Reserve may cut interest rates from 5.25 percent this year.

Silver edged down to $13.73/13.78 an ounce from $13.78/13.81 late in New York and off Monday's 1-week high of $14.09.

Platinum fell to $1,304/1,309 an ounce from $1,315/1,320 an ounce. On Monday, it matched Friday's five-month high of $1,330 ahead of the launch of exchange-traded funds.

Palladium dropped to $374/379 an ounce from $379/384 late in New York and off Monday's 11-month peak of $384.

REUTERS PV PM1151