PRECIOUS-Gold rises to one-month high as U.S. equities drop

Mon Jan 13, 2014 3:53pm EST

* Bullion extends gains to third straight session
    * Option trades suggest price volatilities to fall
    * Gold seen down 15 pct at $1,050 by year end -Goldman
    * Coming up: US retail sales Tuesday

 (Adds option trader comment, Goldman note, updates market
activities)
    By Frank Tang and Jan Harvey
    NEW YORK/LONDON, Jan 13 (Reuters) - Gold rose to a one-month
high on Monday as fresh losses in U.S. equities triggered
safe-haven buying and extended the previous session's bullion
rally sparked by lackluster U.S. nonfarm payrolls data.
    The metal posted its third consecutive daily rise and
accelerated gains as the S&P 500 equities index fell more
than 1 percent as investors awaited company earnings. 
    Analysts said gold's 4 percent gain year-to-date was
supported by a drop in equities early in 2014 following a record
run-up in stocks last year. 
    "There was some follow-through buying from Friday's job
report and rotation from equities to gold," said Frank McGhee,
head precious metals dealer at Chicago commodities brokerage
Alliance Financial LLC.
    "At some point, gold's rally is going to fade" because of an
improving economic outlook, McGhee said.
    Spot gold was up 0.5 percent to $1,252.84 an ounce by
2:56 p.m. EDT (1915 GMT), having earlier hit a one-month high at
$1,254.50.
    On Friday, gold rallied 1.5 percent after disappointing U.S.
jobs data stirred speculation the Federal Reserve will take a
gradual approach to tapering its bond-buying stimulus this year.
    U.S. COMEX gold futures for February delivery settled
up $4.20 an ounce at $1,251.10, the contract's highest close
since Dec. 11.
    Trading volume was about 40 percent below its 250-day
average, preliminary Reuters data showed.
    COMEX gold options floor trader Jonathan Jossen said that
large option traders were selling straddles to capture the
premiums as they expect gold prices to stay rangebound in the
near term.
    Straddle is an option strategy involving buying one call
option and one put option with the same strike and same expiry
date. Its value tends to rise when volatilities are increasing.
    Bullion largely shook off early losses stemming from the
U.S. investment bank Goldman Sachs' forecast of a year-end price
target of $1,050 for gold, putting the yellow metal on course
for a 15 percent loss from current levels.
    In supply news, gold production in China rose 7 percent from
a year earlier to reach 392.141 tonnes in the first 11 months of
2013, data from the China Gold Association showed on Monday.
 
    Among other precious metals, silver rose 1.2 percent
to $20.36 an ounce. 
    Platinum prices were underpinned by supply worries after
South Africa's Association of Mineworkers and Construction Union
(AMCU) said on Monday its workers had voted in favor of a strike
over wages at Impala Platinum (Implats), the world's
second-largest producer of the metal. 
    Platinum rose 0.3 percent to $1,438.24 an ounce and
palladium lost 0.2 percent to $737.22 an ounce.
 2:56 PM EST     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold FEB   1251.10   4.20   0.3  1243.00 1255.30  104,909
 US Silver MAR  20.385  0.162   0.8   19.955  20.470   33,827
 US Plat APR   1443.90   7.00   0.5  1433.00 1445.50    6,140
 US Pall MAR    740.00  -6.05  -0.8   737.60  746.80    3,122
                                                              
 Gold          1252.84   6.14   0.5  1244.00 1254.50         
 Silver         20.360  0.250   1.2   19.970  20.430
 Platinum      1438.24   4.74   0.3  1436.40 1440.49
 Palladium      737.22  -1.78  -0.2   739.50  743.75
                                                              
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        131,784   126,829   186,935     18.16   -0.08
 US Silver       36,203    36,179    57,343      24.9   -1.54
 US Platinum      6,210    14,074    12,874     16.45   -1.44
 US Palladium     3,183     3,164     5,854     17.49   -0.81
                                                              
 
 (Additional reporting by Clara Denina in London; Editing by
Dale Hudson, Keiron Henderson, Andrew Hay and Meredith Mazzilli)
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