GOLD and other precious metals fell sharply in New York amid commodity-wide weakness as the US dollar surged.
They also linked some of gold's weakness to a decline in equities, with long liquidation continuing. Funds were among the sellers, said George Gero, vice president with RBC Capital Markets Global Futures.
December gold fell $US13.70 to $US732.80 an ounce on the Comex division of the New York Mercantile Exchange. December silver lost US41.5 cents to $US9.805.
"It's nothing specific to gold and silver," said Dave Rinehimer, director of futures perspective at Citigroup Global Markets. "It's just renewed weakness in commodity prices on a stronger dollar."
Around the time gold floor trading was closing in New York, the Continuous Commodity Index was 11.56 points lower at 358.53 and December crude oil was $US3.66 softer at $US58.75 a barrel. The euro was down to $US1.2516 from $US1.2748 late in the previous session.
There appears to be general risk aversion with equities also on the defensive, amid concerns about global growth and demand for commodities, Mr Rinehimer said. The Dow industrials were around 260 points lower moments ahead of gold's close.
Carlos Sanchez, precious-metals analyst with CPM Group, also cited the stronger US dollar and weaker equities, adding the latter may have prompted some participants to move into cash to cover margins in other markets.
As the economy slows, worries about disinflationary pressures were taking a toll on gold, said Bart Melek, global commodity strategist with BMO Capital Markets.
"Even with the Chinese stimulus package and the aggressive interest-rate cuts we have seen (in the United States and other nations), none of that is going to prevent a considerable downturn in the G7 and likely China over the next few quarters," he said.
Mr Gero and Mr Rinehimer pointed out that open interest keeps falling in gold. In fact, it has been below 300,000 the last two days after earlier in the year being up around 400,000. And that decline in open interest, the analysts said, was a sign of liquidation.
But while gold was sharply lower for the session, the market remained in a largely sideways pattern from recent weeks, Mr Rinehimer and Mr Sanchez said.
"We're still in a range of $US720 to $US770," Mr Sanchez said. "Even though it is a wide range, it's smaller compared to what we've seen the past several weeks. It's a $US50 range, compared to a $US100 to $US150 range at times."
Mr Rinehimer put nearby support in December gold around $US722, near last week's low of $US721.80. The analyst pegged resistance at last week's high of $US770.
He put nearby support in December silver around $US9.20 and resistance around $US10.80.
Meanwhile, the slowing economy means less industrial demand for some of the other precious metals - silver, platinum and palladium, Mr Melek explained.
"They seem to be even more related to the economy than gold is," he said. "They are very much used for manufacturing for the industrial complex globally, and that's looking iffy at this point. So prospects for those metals are eroding."
A platinum group metals trader echoed a similar sentiment.
"The glimmer on sentiment from the Chinese rescue package yesterday dulled quickly," he said. "There seems to be retracting demand. (Recent bearish) news on GM, Ford, Chrysler and others is continuing to weigh on the commodities right now."
January platinum fell $US33.30 to $US826.60 an ounce, while December palladium declined $US2.75 to $US219.25 an ounce.
