PRECIOUS-Gold drops on weak equities, Europe uncertainty

Thu Oct 18, 2012 3:06pm EDT

Related Topics

* Germany, France clash on key issues before EU summit
    * Open interest in US futures falls, price volatility down
    * Physical demand in India wanes due to weak rupee
    * Coming up: U.S. existing home sales Friday

 (Adds market details, updates prices)
    By Frank Tang
    NEW YORK, Oct 18 (Reuters) - Gold fell on Thursday as weaker
U.S. equities and uncertainty over the commitment of Germany and
France to battle the euro zone debt crisis prompted the bullion
market to consolidate gains after its recent rally.
    The metal declined as the dollar rose against the euro after
Berlin and Paris, Europe's central powers, clashed over greater
EU control of national budgets and other issues before a summit
of the bloc's leaders. 
    Gold tracked the S&P 500 index, which fell after the
number of Americans filing new claims for jobless benefits
spiked last week. Earlier in the day, data showed China's
economy slowed for a seventh straight quarter, even though other
numbers pointed to a mild year-end rebound. 
 
    The gold market appears to have factored in optimism related
to the U.S. Federal Reserve's monetary stimulus announced in
September, analysts said. Gold was still $150 per ounce higher
than its mid-August level despite a recent pullback.
    "Without any other major drivers, the precious metals will
continue to show weakness and test the downside" because the
latest buyers might lack patience to wait for another bull run,
said Carlos Perez-Santalla, a broker at brokerage PVM Futures.  
    
    Spot gold fell 0.4 percent on the day to $1,742.50 an
ounce by 2:29 p.m. EDT (1829 GMT). 
    U.S. COMEX gold futures for December delivery settled
down $8.30 an ounce at $1,744.70, with trading volume at 40
percent below average, preliminary Reuters data showed.
    Open interest in gold futures fell 3 percent this week, a
sign funds were liquidating positions and switching to
better-performing assets such as equities, analysts said.
    Gold's 30-day implied volatility fell to 13 on
Wednesday, near a 15-month low.
    The trading range is expected to be narrow this week with
the COMEX November option expiring next week and significant
open interest near its current level at $1,750 an ounce, TD Bank
strategists said in a note.
    Also pressuring bullion was a bearish call on crude oil by
Goldman Sachs, one of the biggest banks in commodity trading.
The firm has called an end to the oil price super-cycle,
reversing years of bullish forecasts, citing a rise in U.S. and
Canadian unconventional oil supplies. 
    Silver fell 1 percent to $32.83, tracking gold. 
    
    PHYSICAL DEMAND LAGGING
    Analysts said physical demand was weaker than expected for
the time of year, when the traditional Indian wedding season,
the Islamic Eid al-Adha festival and the build-up to Christmas
and Chinese New Year tend to ramp up bullion buying.
    Demand from gold importers in India appeared to wane on
Thursday as a weaker rupee drove up domestic prices in the
world's largest gold buyer for the third consecutive session.
    Among platinum group metals, platinum dropped 1.1
percent to $1,640.74, while palladium was up 0.8 percent
at $643.50.
    
 2:29 PM EDT     LAST/    NET   PCT      LOW    HIGH  CURRENT 
               SETTLE   CHNG  CHNG                       VOL 
 US Gold DEC   1744.70  -8.30  -0.5  1739.00 1753.40   92,928 
 US Silver DEC  32.868 -0.364  -1.1   32.745  33.325   26,684 
 US Plat JAN   1643.70 -26.80  -1.6  1643.00 1677.80    8,824 
 US Pall DEC    647.20  -6.20  -0.9   645.15  655.60    1,974 
                                                              
 Gold          1742.50  -7.19  -0.4  1738.80 1751.79         
 Silver         32.830 -0.330  -1.0   32.760  33.280 
 Platinum      1640.74 -18.46  -1.1  1643.50 1669.74 
 Palladium      643.50  -5.10  -0.8   647.77  653.50 
                                                              
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY 
               CURRENT   30D AVG  250D AVG   CURRENT     CHG 
 US Gold         97,459   166,822   174,132     15.19   -0.07 
 US Silver       29,151    49,870    56,618        35    7.00 
 US Platinum      8,908    15,447     9,770     22.14   -1.57 
 US Palladium     1,992     4,158     4,792                  
                                                              
 

 (Additional reporting by Clare Hutchison in London; Editing by
Dale Hudson and Grant McCool)
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