December 4, 2012 / 12:10 PM / in 5 years

PRECIOUS-Gold hits one-month low on fund selling, technicals

* Gold hits lowest since Nov. 6, breaking below 100 DMA
    * Options-related selling, fund liquidation weigh
    * Markets eye U.S. nonfarm payrolls Friday
    * Coming up: U.S. private-sector ADP Nat'l employment Wed.

 (Adds market details, updates prices)
    By Frank Tang
    NEW YORK, Dec 4 (Reuters) - Gold fell more than 1 percent on
Tuesday, underperforming equities and other commodities, as
heavy fund liquidation and options-related selling sent bullion
prices below a key technical support.
    The metal hit its lowest price in nearly a month after
breaking below its 100-day moving average around $1,700 an
ounce, a level the metal had held since mid-August. 
    Economic uncertainty related to U.S. budget talks and waves
of heavy selling after last week's option expirations also
pressured bullion, traders said.
    "You cannot attribute this kind of volatility to any sudden,
new fundamentals. There are obviously some large fund-,
algorithmic-type players moving the market around," said Bill
O'Neill, partner of commodities investment firm LOGIC Advisors. 
    Open interest, a gauge of market activity, has fallen 10
percent since hitting a 14-month high of nearly 500,000 lots on
Nov. 23. The market has now fallen in five of the last seven
    Spot gold fell as low as $1,690.64 an ounce and was
down 1.2 percent at $1,694.44 by 2:22 p.m. EST (1922 GMT).
    Most-active U.S. COMEX futures contract for February
delivery settled down $25.30 at $1,695.80, with trading
volume in line with its 30-day average, preliminary Reuters data
    Dealers say confidence in gold has also been eroded by
memories of last December's 10 percent price slide and
disappointment over a failure to break $1,800 an ounce on the
heels of the Fed's assets buyback in September.
    Republicans in the U.S. Congress on Tuesday attacked each
other over their leadership's "fiscal cliff" offer to Democratic
President Barack Obama. 
    Jeffrey Sherman, commodities portfolio manager at the
$50-billion DoubleLine Capital, said gold was weighed down by
the bickering between Republicans and Democrats over tax hikes
and spending cuts due to take effect at year-end unless a budget
agreement is reached. Economists said such drastic fiscal
measures could push the U.S. economy into recession, dragging
equities and other assets lower and undermining gold's
inflation-hedge appeal.
    Spot silver dropped 2.1 percent to $32.90.
    Gold investors are now focusing on the outlook for U.S.
non-farm payrolls data on Friday, due to the link between job
creation and monetary policy. Continued weak job creation
numbers could mean the Fed's monthly buyback of $40 billion in
mortgage-backed securities would likely continue in the near
    Another round of aggressive Fed asset buyback and possible
economic stimulus from the Bank of Japan could lift gold prices,
said Mark Luschini, chief investment strategist of broker-dealer
Janney Montgomery Scott, which manages $54 billion in assets. 
    Platinum group metals retreated after Monday's gain on news
U.S. auto sales in November raced to a five-year high for that
month on a rebound from storm-ravaged October and the need to
replace aging vehicles. Encouraging auto sales data left
industry executives optimistic about 2013. 
    Platinum was down 1 percent at $1,584.24 an ounce,
while palladium, which has risen for the past five weeks,
fell 0.9 percent to $679.50.
 2:22 PM EST     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold FEB   1695.80 -25.30  -1.5  1692.60 1719.20  171,480
 US Silver MAR  32.808 -0.951  -2.8   32.745  33.750   45,223
 US Plat JAN   1582.90 -30.90  -1.9  1581.00 1609.90    7,970
 US Pall MAR    682.70  -8.55  -1.2   678.80  691.80    3,426
 Gold          1694.44 -20.41  -1.2  1690.64 1717.06         
 Silver         32.900 -0.710  -2.1   32.700  33.660
 Platinum      1584.24 -16.51  -1.0  1584.00 1605.50
 Palladium      679.50  -6.30  -0.9   680.27  689.00
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        184,953   184,922   174,492     13.09    0.10
 US Silver       47,973    58,689    52,693     22.67    0.47
 US Platinum      8,874     8,851     8,877     16.64   -1.22
 US Palladium     3,528     6,073     4,747                  

 (Additional reporting by Jan Harvey and David Brough in London;
Editing by Bob Burgdorfer)
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