Gold gives up gains to drop nearly 1 pct on U.S. housing data

NEW YORK/LONDON, Reuters (27/11) - Gold fell nearly 1 percent on Tuesday, retreating from a one-week high set earlier in the session, as encouraging U.S. housing activity stirred fears the Federal Reserve will soon decide to reduce its bond-buying stimulus program. Bullion came under pressure after data showed permits for future U.S. home construction hit a near 5-1/2 year high in October, and a report showed the S&P/Case Shiller composite index of home prices in 20 metropolitan areas jumped 13.3 percent in September. The reports were the latest signs of strength in the economy, despite headwinds from rising mortgage rates and last month's partial government shutdown. Spot gold was down 0.9 percent at $1,241.24 an ounce by 3:05 p.m. EST (2005 GMT), having earlier hit $1,256.49 in early trading, its highest since Nov. 20. U.S. gold futures outperformed spot bullion, and they settled up 20 cents at $1,241.40 an ounce. Trading volume was at 282,600 lots, preliminary Reuters data showed, nearly double its 30-day average of 156,000 lots and largely boosted by the December-February contract rollover ahead of the December contract's first-notice day on Friday. Some investors reduced their bullish bets after a rally driven by buying related to Comex December option expiry on Monday, said Frank McGhee, head precious metals dealer at Chicago commodities brokerage Alliance Financial LLC. A higher S&P 500 equities index on the bright housing data also weakened gold's safe-haven appeal, traders said.