PRECIOUS-Gold drops 2 pct on fund selling, US rate hike fears

Mon Mar 24, 2014 3:29pm EDT

* Prospect of rising US rates triggers profit taking in gold
    * Lower gold forecasts by bank analyst sap momentum
    * Palladium hits 2-1/2 year high, tracks gold
    * Coming up: US Case-Shiller home price data Tuesday

 (Adds comment, updates market activities)
    By Frank Tang and Jan Harvey
    NEW YORK/LONDON, March 24 (Reuters) - Gold prices tumbled
about 2 percent on Monday, the biggest one-day drop in nearly
two months, as hedge funds dumped the precious metal on fears
that rising U.S. interest rates could spark a further retreat
from last week's six-month high.
    The metal sank to a one-month low near $1,300 an ounce on a
day when outside markets remained largely immune from gold's
selloff. Recent forecasts of sharply lower gold prices at below
$1,200 by Societe Generale and other bullion banks also prompted
institutional investors to sell bullion, analysts said.
    Gold investor sentiment turned bearish last week after Fed
Chair Janet Yellen said the central bank will probably end its
massive bond-buying program this fall, and could start raising
interest rates around six months later. 
    "Momentum investors are capitalizing on the concern over a
stronger dollar and rising interest rates by the end of the
year," said Jeffrey Sica, chief investment officer at New
Jersey-based Sica Wealth which manages over $1 billion in client
assets. 
    Spot gold was down 1.9 percent at $1,308.70 an ounce
at 2:57 p.m. EDT (1857 GMT), its biggest daily fall since Jan.
30. Earlier, it hit $1,307.54, the lowest since Feb. 14. 
    U.S. COMEX gold futures for April delivery settled
down $24.80 an ounce at $1,311.20 an ounce, with trading volume
about 35 percent above its 30-day average, preliminary Reuters
data showed.
    "It's an extension of people digesting Yellen's comment
about the interest rate," said Phillip Streible, senior
commodities broker at RJ O'Brien. The lower U.S. stock market
also triggered profit-taking across the board.
    The metal fell 3.5 percent last week, after Yellen's
comments surprised world markets by signalling that U.S.
interest rates could rise sooner than had been expected.
    Silver fell 1.6 percent at $19.93 an ounce, dragged
down by gold's sharp losses.
    Among platinum group metals, palladium rose to a 2-1/2 year
peak on supply worries due to a combination of a strike in South
Africa, simmering tensions over Ukraine and the launch of two
palladium-backed exchange-traded funds in Johannesburg.
 
    Palladium hit its highest since August 2011 at
$799.50 an ounce. The autocatalyst metal later edged up 0.2
percent at $790.90 an ounce. Platinum was down 0.5
percent at $1,424.25 an ounce.

2:57 PM EST     LAST/    NET   PCT      LOW    HIGH  CURRENT
               SETTLE   CHNG  CHNG                       VOL
US Gold APR   1311.20 -24.80  -1.9  1308.50 1335.70  166,822
US Silver MAY  20.067 -0.243  -1.2   19.920  20.315   39,439
US Plat APR   1431.20  -4.80  -0.3  1428.50 1444.40   18,161
US Pall JUN    794.35   5.05   0.6   782.15  802.45    6,967
Gold          1308.70 -25.24  -1.9  1308.35 1334.36         
Silver         19.930 -0.330  -1.6   19.940  20.280
Platinum      1424.25  -7.00  -0.5  1428.00 1439.75
Palladium      790.90   1.90   0.2   783.00  799.50
TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
               CURRENT   30D AVG  250D AVG   CURRENT     CHG
US Gold        224,753   170,457   185,433     17.45    0.69
US Silver       43,300    65,238    58,366     24.36   -1.49
US Platinum     30,859    13,903    13,233     19.13    0.50
US Palladium     7,008     7,634     5,687     22.68    1.29

 (Additional reporting by Lewa Pardomuan in Singapore; Editing
by Susan Fenton, Stephen Powell and Diane Craft)
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.