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U.S. gold, silver pummeled as investors flee risk

 NEW YORK, Nov 12 (Reuters) - Gold futures in New York
dropped more than 3 percent and silver contracts also tumbled
early Monday on a rebounding dollar and falling crude oil, as
the latest wave of risk aversion swept through the precious
metals markets.
 However, traders were optimistic and said that a correction
in the bullion market was necessary for prices to rise further
after its recent strong rally, they said.
 "You got to have a reversal in some of these markets. That's
very healthy. Why not be down $30 on the day (for gold)? It
won't surprise me," said Jonathan Jossen, an independent COMEX
floor trader in New York.
 At 10:30 a.m. EST (1530 GMT), most-active December gold
GCZ7 on the COMEX division of the New York Mercantile Exchange
shed $28.80 or 3.4 percent at $805.90 an ounce, after hitting a
low of $803, a 10-day bottom. It touched a high of $833.60.
 Yet Jossen also said that a large number of gold call
options were bought as some investors were still bullish.
 "Anybody that's been in commodities has huge gains. They
don't think anything has changed in this market, it's just
profit taking," he said.
 Jossen said that he pegged chart-based support at $806 but
he was not certain if that level would hold.
 Before Monday's fall, gold futures had soared as much as
$40 just last week and had been up about $200 from their August
lows.
 On Monday, currency traders were unwinding their risky carry
trades, resulting in a surge of the yen versus the dollar.
 The yen rose to a 1-1/2-year high against the U.S. currency,
benefiting from a spike in volatility caused by nervousness
about credit-related losses at U.S. banks.
 However, the dollar was higher against other major
currencies, prompting market players to sell gold heavily.
 John Reade, head of precious metals strategy at UBS AG in
London, told clients in a note that gold remained vulnerable to
further losses, and the key would be the direction of the
dollar.
 "If risk aversion triggers further dollar weakness, then
gold should hold quite well and may even move higher on safe
haven buying. But if risk aversion sees some dollar
repatriation, as has happened on a number of occasions in the
past few years, then further losses will materialise," Reade
said.
 A report also showed that speculative long position in the
gold futures market remained near record high.
 The U.S. Commodity Futures Trading Commission said in its
latest Commitment of Traders report that net specs' longs in
gold futures climbed to 202,125 contracts for the week up to
Nov. 6, up from 198,606 in the week earlier.
 Spot gold XAU= was quoted at $804.10/804.90, compared with
the Friday New York close at $832.30/833.10. London bullion
dealers fixed the afternoon spot reference price at $803.50.
 COMEX December silver SIZ7 plummeted 79 cents or 5.1
percent at $14.755 an ounce, after trading as low as $14.670,
which marked a one-week low. It hit a high of $15.500.
 Spot silver XAG= was quoted at $14.72/14.77 compared with
Friday's late New York quote of $15.47/15.52. London silver was
fixed at $15.15.
 NYMEX January platinum PLF8 was down $34.50 or 2.4
percent at $1,391.50 an ounce. It hit a low of $1,390.10, which
marked the weakest since Oct 11. Spot platinum XPT= was
quoted at $1,390/1,394.
 December palladium PAZ7 dropped $8.45 or 2.3 percent to
$367.80 an ounce. Spot palladium XPD= fetched $364/368.
 (Reporting by Frank Tang, editing by Matthew Lewis)






















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