STRENGTH in the US dollar pressured gold futures as some of the recent long liquidation continued, analysts said.
Silver, however, managed a gain amid reports of short covering. In fact, silver finished higher despite sell-offs in gold and copper, two metals it often tracks since silver has a roles as both a monetary and an industrial metal.
December gold fell $US22 to $US768 an ounce on the Comex division of the New York Mercantile Exchange.
"The strength in the dollar is pretty much weighing on the commodities," said Dave Rinehimer, director of futures perspective at Citigroup Global Markets. "And you still have the same concerns of risk aversion and deleveraging being reflected in the sharp move in commodity prices."
The euro hit a low of $US1.3079 against the US dollar, its weakest level since March 2007.
Shortly after gold closed, the Continuous Commodity Index was down 3.51 points to 382.51, while November crude oil was $US2.94 weaker per barrel at $US71.31.
Stephen Platt, analyst with Archer Financial Services, cited not only the strong US dollar but "disappointed liquidation," as well as fears about a slowing economy leading to lower fabrication demand for the gold.
There are reports of credit markets freeing up somewhat, and that may be resulting in some easing of the flight-to-quality bid, Mr Platt said.
"That has touched off some liquidation pressure," Mr Platt said. "We took out the low of a couple of days ago, fostering some liquidation pressure and stop-loss selling."
December gold fell as far as $US766.40, breaking down through Friday's low of $US772.20. The key nearby support traders have been citing is the September 11 low of $US739.80.
Mr Rinehimer put upside resistance around the $US825 region.
George Gero, vice president with RBC Capital Markets Global Futures, added that liquidation in gold occurred as equities moved lower. He also cited a decline in the most recent open-interest data, a fall of 3147 lots reported for Monday, as further evidence of an exodus from the market.
A daily research report from Barclays Capital said safe-haven buying has started to wane, but physical buying has picked up with prices below the $US800 level.
Silver rose, with the December futures adding US38.5 cents to $US10.075 an ounce.
"It held above yesterday's lows at $US9.35, and didn't really break down like the other metals," Mr Rinehimer said. "That might have brought in some short covering into the market."
JPMorgan analyst Michael Jansen, in a daily research report, described a "palpable tightening" in the silver market with strong physical buying, particularly in India, causing physical shorts in London to cover.
"This may continue for another two-to-four weeks and could see a decent decline in the gold/silver ratio as well as a generally robust silver price," he said.
Mr Gero reported that some traders seemed interested in buying silver and selling gold.
Demand for silver from jewellers and fabricators was high during the festival season in India, especially when refineries were already running "flat out," Mr Jansen said.
"Fundamentally, from a long-term perspective, it is hard to get excited about silver, with mine supply growing robustly and demand from fabricators weakening on the back of the global industrial production slowdown," Mr Jansen said.
"But right now, the fact is that there is a spike in jewellery and investor demand out of India that has caught a relatively short silver market unawares, as bullion leaves London vaults in significant quantities to meet increasing Indian demand."
Mr Rinehimer put nearby support for December silver around $US9.10 and resistance around $US10.80.
Meanwhile, as gold and silver were moving in opposite directions, the Nymex platinum group metals largely meandered sideways. Both posted inside sessions in which the highs and lows were contained within the previous session’s range. January platinum slipped US80c to $US891.70 an ounce, while December palladium gained $US3.05 to $US183.10 an ounce.
