RTRS:PRECIOUS-Gold extends losses after carnage on Europe woes
* Italy bond yields rise to new high; Spain bond sales on
watch
* Spot platinum falls to two-year trough
* Coming up: Spain bond auctions
(Updates prices)
By Rujun Shen
SINGAPORE, Dec 15 (Reuters) - Spot gold stretched
losses on Thursday, after falling 3.5 percent in the previous
session, as investors remained nervous about the euro zone debt
crisis amid the year-end rush to liquidate positions.
Asian shares retreated and the euro and commodities nursed
stinging losses as fears grew that the euro zone debt crisis was
spinning out of control after Italy's borrowing costs hit a new
high in the euro era.
The pessimism on the euro zone, as well as the liquidation
of positions by funds, plunged spot gold to its lowest level
since late September on Wednesday, its third session of losses.
Precious metals with industrial applications, such as silver
and platinum, also fell sharply as the economic outlook dims.
"It's not only because of the stronger dollar, the year-end
fund redemption and margin call demand from other markets also
contributed to the sell-off," said a Shanghai-based trader.
"We might see further weakness in prices as the sentiment
around Europe remains rather bearish."
Spot gold lost 0.6 percent to $1,564.89 an ounce by
0646 GMT, after posting its biggest one-day decline in nearly
three months on Wednesday.
The Relative Strength Index on spot gold dived to below 27,
its lowest in more than three years, indicating an oversold
market.
U.S. gold fell 1.2 percent to $1,568.40.
Technical analysis suggested that spot gold could fall
further after breaking below the 200-day moving average, a major
support line, but the demise of the bull trend is not a foregone
conclusion.
Investors will be watching Spain's debt sales later in the
day, as well as inflation and manufacturing purchasing managers
index for the euro zone, to gauge the reach of the debt crisis.
"We're in for a long sideways volatile market," said Jeremy
Friesen, commodity strategist at Societe Generale in Hong Kong,
"We can go through weeks, if not months, of slow drawn-out
process, because it's ultimately a fiscal problem in Europe that
needs to be resolved."
Prices are prone to volatile moves at the end of the year on
thinning liquidity as many have closed their books for the year
and moved to the sidelines of the market, waiting for a fresh
start in January.
Despite the steep decline in gold prices, holdings of SPDR
Gold Trust, the world's largest gold-backed
exchange-traded fund, were unchanged at 1,294.796 tonnes by Dec.
14. The holdings edged down 0.6 tonnes, compared to an 8-percent
drop in gold prices.
PLATINUM, SILVER SLIDE
The slowing of manufacturing in China, the world's
second-largest economy and top consumer of many raw materials,
also piled pressure on industrial metals.
Spot platinum tumbled as much as 3.2 percent to a
two-year low of $1,372, before trimming some losses to trade
at$1,383.
Spot silver dropped to $28.11, its lowest since late
September. The metal has fallen nearly 13 percent so far this
week, pushing the year-to-date performance into the red.
The gold-silver ratio, used to measure how many ounces of
silver is used to buy an ounce of gold, rose to 55, its highest
since October, 2010.
Some expected silver to test a September low of $26, before
prices could stabilise and move up again.
"If we can build a bottom in the range of $25 to $28, prices
will be able to slowly rise next year," said the Shanghai-based
trader.
