Gold drops to 3-mth low on fund trade, debt deal hopes

Industry News 10:18:43AM Oct 12, 2013 Source:SMM

Fri, 11 Oct 19:25:00 GMT

* Gold falls abruptly in early U.S. trade as funds exit

* Obama, Republicans work to end budget crisis

* Gold accelerates losses after breaching key chart support

* Coming up: Talks in Washington continue to solve budget impasse


(Adds ETF details, updates market activity)

By Frank Tang and Clara Denina

NEW YORK/LONDON, Oct 11 (Reuters) - Gold fell 1.5 percent on Friday to its lowest in three months as unusually large sale orders in New York futures and signs a deal might be near to avert a potential U.S. debt default prompted jittery investors to flee the bullion market.

The precious metal, generally viewed as a safe-haven investment, fell $30 an ounce in just minutes in early U.S. trading, sparking selloffs in crude oil and copper. Friday's drop was reminiscent of a huge sell order that sent gold prices 3 percent lower on Oct. 1.

U.S. gold futures trading was momentarily halted at 8:42 a.m. EDT (1242 GMT) by CME Group's <CME.O> Stop Logic mechanism to prevent excessive price movements. In the three minutes around the ten-second trading pause, gold prices slid almost $30, or about 2 percent, with an unusually heavy turnover at nearly 20,000 contracts - about one-fifth of the market's volume at the time.

Bullion's drop stands in sharp contrast with higher U.S. equities and a lower dollar as other investors were encouraged by the first signs of progress by U.S. lawmakers to end the standoff in Washington.

On Friday, President Barack Obama and congressional Republican leaders moved to end their fiscal impasse but struggled to strike a deal on the details for a short-term reopening of the federal government and an increase in the U.S. debt limit. [ID:nL1N0I10V7]

"If there is a temporary stop-gap measure to avert a disaster of U.S. default, it will lead to the gold market going even lower," said Jeffrey Sica, chief investment officer of Sica Wealth, which manages over $1 billion of client assets.

Gold's sudden price tumble was a result of hedge funds and institutional investors flooding the gold futures market with sell orders, traders said.

U.S. Comex December gold futures settled down $28.70 at $1,268.20 an ounce by 2:27 p.m. EDT, with trading volume about 10 percent above its 30-day average, preliminary Reuters data showed.

Spot gold <XAU=> was down 1.5 percent at $1,266.80, having earlier fallen as much as 1.8 percent to its lowest since July 10 at $1,262.14 an ounce.

Friday extended bullion's drop to a fourth consecutive day, its longest losing streak since late June.

For the week, the metal was down 3.4 percent, its sixth weekly decline in seven weeks.


TECHNICAL BREAKDOWN

Gold's losses were triggered by a break below key support between $1,273-1,278, which represents the low from Aug. 7, Oct. 2, and the neckline of a head-and-shoulder continuation pattern, said Jonathan Krinsky, chief technical market analyst at institutional trading firm Miller Tabak.

Technical charts now suggest gold to fall to an area between $1,110 and $1,120, below June's three-year low at $1,180, Krinsky said.

As a gauge of investor interest, the gold holdings of SPDR Gold Trust <GLD>, the world's largest gold-backed ETF, dropped 0.2 percent, or 1.80 tonnes, to 896.38 tonnes on Thursday. That marked a four-year low. [GOL/ETF]

Uncertainty over talks to lift the U.S. debt ceiling in 2011 was a main driver for gold to hit record highs at above $1,920 an ounce. This year, sentiment towards bullion is much less positive, holding the metal in narrow ranges as markets largely expect the debt limit to be raised, analysts said.

Among other precious metals, silver <XAG=> fell 1.9 percent to $21.22 an ounce. Platinum <XPT=> was down 1 percent at $1,366.49 an ounce, while palladium <XPD=> rose 0.5 percent to $709.22 an ounce.

2:27 PM EDT LAST/ NET PCT LOW HIGH CURRENT

SETTLE   CHNG  CHNG                       VOL
US Gold DEC   1268.20 -28.70  -2.2  1259.60 1294.80  167,221
US Silver DEC  21.259 -0.637  -2.9   20.950  21.860   45,284
US Plat JAN   1375.60 -20.40  -1.5  1362.50 1391.70   10,229
US Pall DEC    713.30   0.75   0.1   706.80  716.95    3,303

Gold          1266.80 -18.77  -1.5  1262.95 1293.96
Silver         21.220 -0.400  -1.9   21.020  21.820
Platinum      1366.49 -13.51  -1.0  1367.00 1388.50
Palladium      709.22   3.22   0.5   708.52  714.50

TOTAL MARKET VOLUME 30-D ATM VOLATILITY
CURRENT 30D AVG 250D AVG CURRENT CHG
US Gold        176,618   160,574   189,552     24.98    1.28
US Silver       50,447    47,019    56,651     34.28   -1.39
US Platinum     10,922    14,713    13,005      20.8    0.00
US Palladium     3,337     4,284     5,793

(Editing by Marguerita Choy and Alden Bentley)((Frank.Tang@thomsonreuters.com)(+1 646 223 6126)(ReutersMessaging: frank.tang.thomsonreuters@reuters.net))

Key Words:  MARKETS PRECIOUS 

Gold drops to 3-mth low on fund trade, debt deal hopes

Industry News 10:18:43AM Oct 12, 2013 Source:SMM

Fri, 11 Oct 19:25:00 GMT

* Gold falls abruptly in early U.S. trade as funds exit

* Obama, Republicans work to end budget crisis

* Gold accelerates losses after breaching key chart support

* Coming up: Talks in Washington continue to solve budget impasse


(Adds ETF details, updates market activity)

By Frank Tang and Clara Denina

NEW YORK/LONDON, Oct 11 (Reuters) - Gold fell 1.5 percent on Friday to its lowest in three months as unusually large sale orders in New York futures and signs a deal might be near to avert a potential U.S. debt default prompted jittery investors to flee the bullion market.

The precious metal, generally viewed as a safe-haven investment, fell $30 an ounce in just minutes in early U.S. trading, sparking selloffs in crude oil and copper. Friday's drop was reminiscent of a huge sell order that sent gold prices 3 percent lower on Oct. 1.

U.S. gold futures trading was momentarily halted at 8:42 a.m. EDT (1242 GMT) by CME Group's <CME.O> Stop Logic mechanism to prevent excessive price movements. In the three minutes around the ten-second trading pause, gold prices slid almost $30, or about 2 percent, with an unusually heavy turnover at nearly 20,000 contracts - about one-fifth of the market's volume at the time.

Bullion's drop stands in sharp contrast with higher U.S. equities and a lower dollar as other investors were encouraged by the first signs of progress by U.S. lawmakers to end the standoff in Washington.

On Friday, President Barack Obama and congressional Republican leaders moved to end their fiscal impasse but struggled to strike a deal on the details for a short-term reopening of the federal government and an increase in the U.S. debt limit. [ID:nL1N0I10V7]

"If there is a temporary stop-gap measure to avert a disaster of U.S. default, it will lead to the gold market going even lower," said Jeffrey Sica, chief investment officer of Sica Wealth, which manages over $1 billion of client assets.

Gold's sudden price tumble was a result of hedge funds and institutional investors flooding the gold futures market with sell orders, traders said.

U.S. Comex December gold futures settled down $28.70 at $1,268.20 an ounce by 2:27 p.m. EDT, with trading volume about 10 percent above its 30-day average, preliminary Reuters data showed.

Spot gold <XAU=> was down 1.5 percent at $1,266.80, having earlier fallen as much as 1.8 percent to its lowest since July 10 at $1,262.14 an ounce.

Friday extended bullion's drop to a fourth consecutive day, its longest losing streak since late June.

For the week, the metal was down 3.4 percent, its sixth weekly decline in seven weeks.


TECHNICAL BREAKDOWN

Gold's losses were triggered by a break below key support between $1,273-1,278, which represents the low from Aug. 7, Oct. 2, and the neckline of a head-and-shoulder continuation pattern, said Jonathan Krinsky, chief technical market analyst at institutional trading firm Miller Tabak.

Technical charts now suggest gold to fall to an area between $1,110 and $1,120, below June's three-year low at $1,180, Krinsky said.

As a gauge of investor interest, the gold holdings of SPDR Gold Trust <GLD>, the world's largest gold-backed ETF, dropped 0.2 percent, or 1.80 tonnes, to 896.38 tonnes on Thursday. That marked a four-year low. [GOL/ETF]

Uncertainty over talks to lift the U.S. debt ceiling in 2011 was a main driver for gold to hit record highs at above $1,920 an ounce. This year, sentiment towards bullion is much less positive, holding the metal in narrow ranges as markets largely expect the debt limit to be raised, analysts said.

Among other precious metals, silver <XAG=> fell 1.9 percent to $21.22 an ounce. Platinum <XPT=> was down 1 percent at $1,366.49 an ounce, while palladium <XPD=> rose 0.5 percent to $709.22 an ounce.

2:27 PM EDT LAST/ NET PCT LOW HIGH CURRENT

SETTLE   CHNG  CHNG                       VOL
US Gold DEC   1268.20 -28.70  -2.2  1259.60 1294.80  167,221
US Silver DEC  21.259 -0.637  -2.9   20.950  21.860   45,284
US Plat JAN   1375.60 -20.40  -1.5  1362.50 1391.70   10,229
US Pall DEC    713.30   0.75   0.1   706.80  716.95    3,303

Gold          1266.80 -18.77  -1.5  1262.95 1293.96
Silver         21.220 -0.400  -1.9   21.020  21.820
Platinum      1366.49 -13.51  -1.0  1367.00 1388.50
Palladium      709.22   3.22   0.5   708.52  714.50

TOTAL MARKET VOLUME 30-D ATM VOLATILITY
CURRENT 30D AVG 250D AVG CURRENT CHG
US Gold        176,618   160,574   189,552     24.98    1.28
US Silver       50,447    47,019    56,651     34.28   -1.39
US Platinum     10,922    14,713    13,005      20.8    0.00
US Palladium     3,337     4,284     5,793

(Editing by Marguerita Choy and Alden Bentley)((Frank.Tang@thomsonreuters.com)(+1 646 223 6126)(ReutersMessaging: frank.tang.thomsonreuters@reuters.net))

Key Words:  MARKETS PRECIOUS