PRECIOUS-Gold down on US fiscal worries, options in focus

Tue Nov 27, 2012 3:34pm EST

* U.S. fiscal crisis worries weigh
    * COMEX open interest hovers near 2012 high after Fri. rally
    * Gold, outside markets ignore Greek aid agreement news
    * Coming up: US new home sales, Fed's Beige Book Wednesday

 (Adds markets details, graphic link, updates prices)
    By Frank Tang
    NEW YORK, Nov 27 (Reuters) - Gold fell on Tuesday for a
second session as U.S. fiscal worries overshadowed progress in
easing Greece's debt burden, and a key option expiration held
bullion prices in a tight range.
    Safe-haven demand for gold faded after euro zone finance
ministers and the International Monetary Fund agreed to reduce
Greece's debt, paving the way for the release of aid loans.
 
    Still, open interest in U.S. gold futures remained near a
2012 high following Friday's price rally. Analysts said these
new bullish positions could help extend the rally.
    Gold prices have gravitated toward $1,750 an ounce due to
heavy trading of call and put options around that option strike
level, brokers said. COMEX December option expiration is Tuesday
after market close.
    "We believe gold and silver prices will tend towards
consolidation, as investors await further developments on the
U.S. fiscal cliff negotiations," said James Steel, metal analyst
at HSBC.
    Fears of $600 billion in automatic cuts in government
spending and tax increases early next year have decreased gold's
inflation-hedge appeal. Some worry the tax hikes and spending
cuts could tip the U.S. economy into another recession.
    Gold investors were cautious as the U.S. Congress crept
toward compromise on taxes and spending, but a firm deal to
avert the fiscal cliff seemed far off. 
    Spot gold was down 0.4 percent at $1,741.86 an ounce
by 2:44 p.m. EST (1944 GMT), below a five-week high of $1,754.10
reached on Friday. 
    U.S. COMEX gold futures for December delivery settled
down $7.30 at $1,742.30.
    Trading volume was more than 50 percent above the 250-day
average largely due to a combination of option expiry and
contract rollover ahead of first-notice day Friday.
    Heavy buying of $1,700 COMEX January put options also
indicates some investors are looking for protection near the
year end, options traders said.
    (January option positioning: link.reuters.com/cym34t)
    Open interest eased but stayed near a 2012 high at 493,245
lots reached Friday when gold jumped 1.5 percent.
    "Rising open interest on a sharply higher price means
that this was very real buying rather than short covering," said
Dennis Gartman, a veteran trader and the publisher of the
Gartman Letter.

    US FISCAL CRISIS WEIGHS
    Gold ignored positive U.S. economic news. A gauge of planned
U.S. business spending in October rose by the most in five
months. 
    Among other precious metals, silver was down 0.4
percent at $33.98 an ounce. Platinum was unchanged from
Monday's last trade at $1,608.74 an ounce, while palladium
 climbed 0.7 percent to $665.25 an ounce.
 2:44 PM EST     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold DEC   1742.30  -7.30  -0.4  1741.20 1751.90  170,321
 US Silver DEC  33.981 -0.156  -0.5   33.910  34.275   57,292
 US Plat JAN   1618.50   7.50   0.5  1611.10 1623.00    5,227
 US Pall DEC    668.20   7.00   1.1   663.05  672.30    6,995
                                                              
 Gold          1741.86  -6.63  -0.4  1742.03 1751.40         
 Silver         33.980 -0.130  -0.4   33.950  34.260
 Platinum      1608.74   0.00   0.0  1613.50 1618.00
 Palladium      665.25   4.78   0.7   665.20  670.25
                                                              
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        266,868   160,614   175,875     12.96   -0.21
 US Silver       91,644    47,926    56,206      21.2    0.18
 US Platinum      5,426     8,739     9,483     18.28    0.35
 US Palladium    12,390     4,705     4,610                  
                                                              
 
 (Additional reporting by Jan Harvey and David Brough in London,
Graphic by Jan Harvey; Editing by Peter Galloway)