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PRECIOUS-Gold falls 3 pct after sudden early drop saps momentum
September 12, 2013 / 10:21 AM / in 4 years

PRECIOUS-Gold falls 3 pct after sudden early drop saps momentum

* Selling quickens as prices break below key moving averages
    * U.S. gold futures briefly paused to prevent large movement
    * U.S. jobless claims down last week but implication clouded
    * Coming up: US retail sales, Producer Price index Friday

 (Adds trader comment, updates market activity)
    By Frank Tang and Jan Harvey
    NEW YORK/LONDON, Sept 12 (Reuters) - Gold dropped 3 percent
on Thursday, as a sudden price tumble in the futures market
shattered investor confidence, sending the metal to its biggest
one-day drop in more than two months.
    Prices also came under pressure as tensions with Syria eased
and U.S. data reinforced expectations that the U.S. Federal
Reserve will this month start to unwind its monetary stimulus
that has bolstered gold prices for the past four years.
    Silver sank over 5 percent and platinum group metals were
lower after gold's big jolt lower early in London trading.
    U.S. gold futures trading was momentarily halted at 2:54
a.m. EDT (0654 GMT) by CME Group's Stop Logic mechanism. In the
one minute around the 20-second trading pause, gold prices slid
$10 with an unusually heavy 4,300 contracts changing hands,
Reuters data showed.
    "The block trade of futures and the $10 gap down spooked the
market right out of the gate," said Jeffrey Sica, chief
investment officer of Sica Wealth Management, which oversees
more than $1 billion in client assets.
    The losses were all the more significant as investors also
sold the dollar and U.S. equities.  
    Sica said that some sovereign wealth funds and hedge funds
opted to reduce their gold positions after the sudden decline,
extending the gold market's weakness later in the session.
    Stop Logic is aimed at preventing large price movements from
cascading stop-price orders, an order to sell or buy a security
when it reaches a particular price. It also allows participants
to provide additional liquidity.
    Spot gold dropped 3 percent to $1,325.55 an ounce by
at 3:01 p.m. EDT (1901 GMT), for its biggest one-day fall since
June 26. Earlier, the metal hit $1,324.24, its weakest since
Aug. 15.
    For the week, bullion is on track to slip nearly 8 percent
for its biggest weekly decline since the last week of June. 
    Technical selling further pressured prices after the metal
broke through its 100-day moving average at $1,355 an ounce and
its 50-day moving average at $1,335, traders said.
    U.S. gold futures for December delivery settled down
$33.20 an ounce at $1,330.60, with trading volume at about 10
percent above its 30-day average, preliminary Reuters data
    Heavy selling in precious metals came as there were few new 
developments in the Syrian crisis after Syria accepted a Russian
proposal earlier this week to give up its chemical weapons. On
Thursday, Syria applied to sign onto the global ban on chemical
    In addition, while the latest weekly jobless claims data
fell, the drop was clouded by a processing issue, making it 
difficult to get a clear reading on the health of the labor
    Markets outside of precious metals were not moving sharply
on the news. The U.S. dollar was flat and crude oil futures
rallied 1 percent.   
    The Fed's FOMC is set to release a policy statement at the
end of its two-day meeting next Wednesday.
    Consensus is building among analysts that the Federal Open
Market Committee next week could begin to slash its $85 billion
monthly bond purchases. However, the opaque jobless claims data
and disappointing U.S. nonfarm payrolls data last week
complicate an otherwise optimistic economic outlook.
    Among other precious metals, silver was trading down
5.4 percent at $21.92. It has lost 8 percent so far this week.
Platinum dropped 2 percent to $1,437 an ounce, while
palladium fell 0.3 percent to $688.47 an ounce.
 3:01 PM EDT     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold DEC   1330.60 -33.20  -2.4  1325.10 1366.20  167,941
 US Silver DEC  22.149 -1.023  -4.4   21.975  23.265   47,053
 US Plat OCT   1442.70 -30.80  -2.1  1437.70 1476.40   12,768
 US Pall DEC    692.80   1.60   0.2   686.00  696.95    3,795
 Gold          1325.55 -40.59  -3.0  1324.24 1366.64         
 Silver         21.920 -1.240  -5.4   21.950  23.180
 Platinum      1437.00 -28.60  -2.0  1440.50 1474.00
 Palladium      688.47  -2.03  -0.3   687.50  694.50
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        178,705   160,045   181,610     23.04   -0.70
 US Silver       49,129    68,224    58,126     33.74   -2.20
 US Platinum     14,921    10,364    12,288        22    0.00
 US Palladium     3,858     6,777     5,844                  

 (Reporting by Frank Tang and Jan Harvey; Additional reporting
by Clara Denina; Editing by William Hardy, Phil Berlowitz and
Theodore d'Afflisio)

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