PRECIOUS-Gold down 2 pct to 6-month low, 'double-bottom' seen

Thu Dec 19, 2013 4:33pm EST

* Bullion extends slide to third consecutive day
    * Less than $20 above key $1,180 support that marks 3-year
low
    * Market could rally on "double bottom" -fund manager Shah
    * Coming up: U.S. Core PCE price index Friday


    By Frank Tang and Barani Krishnan
    NEW YORK, Dec 19 (Reuters) - Gold prices fell 2 percent to a
six-month low on Thursday in a delayed sell-off after the
Federal Reserve's pullback in the U.S. monetary stimulus, but
the market could snap back into a rally as a "double bottom"
forms on technical charts, some traders cautioned.
    Bullion fell just modestly on Wednesday after the Fed
announced a slight cut in the pace of its monthly asset
purchases that marked the central bank's first step in rolling
back the era of easy money that drove gold to record highs.
 
    In Thursday's session, the market reacted further, plumbing
to its lowest level since June, as speculation about further
stimulus taperings by the Fed heightened deflation fears.
    Even so, some said bullion prices could abruptly reverse
from their current weakness, going by technical readings.
    "We could be forming a massive double bottom - something to
watch in the next couple of weeks - that would swing gold to a
big rally despite the upcoming Fed taper," said Anuraag Shah,
portfolio manager at Tusker Capital, a commodities hedge fund in
Marina Del Ray, California, with about $100 million under
management.
    A double bottom refers to a technical-chart market pattern
made up of two consecutive troughs that are roughly equal, with
a moderate peak in between.
    Reuters data shows the spot price of gold hit a near
three-year low of $1,180.71 an ounce on June 28. It rebounded to
a three-month high of $1,433.31 on Aug. 28, before the six-month
bottom of $1,190.80 on Thursday.
    In spite of Shah's view, the majority of traders, investors
and analysts are pessimistic that gold will regain in near-term
the upward momentum that took it to the all-time high of
$1,920.30 in September 2011.
    Investors are also continuing to sell out of gold-backed
exchange-traded funds, resulting in outflows of some 800 tonnes
this year which have brought ETF holdings in bullion to a 3-1/2
year low. The largest gold ETF, SPDR Gold Shares, saw its
holdings dip by another 4.2 tonnes on Wednesday.
    "A lot of gold investors are anticipating deflation not
inflation as a result of the Fed announcement, taking advantage
of the downside momentum and shorting gold at least
temporarily," said Jeffrey Sica, chief investment officer of New
Jersey-based Sica Wealth with over $1 billion in client assets. 
       
    In announcing the stimulus cut on Wednesday, the Fed also
lowered its expectations for both inflation and unemployment
over the next few years. The central bank trimmed its monthly
asset purchases by $10 billion to $75 billion, leaving markets
guessing about the pace and size of future cuts. 
    By 3:38 p.m. EST (2038 GMT), spot gold was down 2 percent at
$1,192.10, falling for a third straight day.
    Following Thursday's break of the $1,200 support, the spot
price was less than $20 above the near three-year low of
$1,180.71 seen on June 30. Analysts said gold will be vulnerable
to a much sharper pullback if it falls below that bottom.
    In futures trading, U.S. gold futures for February delivery
 settled down 3.4 percent, or $41.40, at $1,193.60, with
trading volume above the 30-day average, preliminary Reuters
data showed.
    Among other precious metals, silver was down 2.7
percent at $19.19 an ounce. Platinum was down 1.2 percent
at $1,314.75 an ounce, while palladium eased 0.5 percent
to $692.30 an ounce.
 4:00 PM EST     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold DEC   1195.00 -41.10  -3.3  1194.20 1226.60      115
 US Silver DEC  19.143 -0.871  -4.4   19.470  19.830        5
 US Plat JAN   1318.40 -24.30  -1.8  1311.70 1339.00   19,561
 US Pall DEC    695.30  -3.10  -0.4   000.00  000.00         
                                                              
 Gold          1190.50 -27.12  -2.2  1189.30 1226.26         
 Silver         19.220 -0.500  -2.5   19.150  19.890
 Platinum      1316.24 -14.76  -1.1  1318.25 1339.25
 Palladium      692.97  -2.53  -0.4   697.70  699.72
                                                              
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        199,455             189,283     23.18   -1.01
 US Silver       48,549              58,610     35.14    1.70
 US Platinum     28,618              12,978     20.36    0.00
 US Palladium     4,198               5,806
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