New York gold falls

Gold futures fell 2.5 percent on Wednesday on selling by hedge funds and a reallocation from commodities into a record breaking stock market rally. Traders braced for a further decline and precious metals remained on the ropes even when crude oil prices recovered from losses.
Investors chose stocks, bonds, and the sidelines, over gold, which was down 7.4 percent from a $612.40 peak on September 28. At the Comex division of the New York Mercantile Exchange, gold for December delivery settled down $14.80 at $566.70 an ounce, having traded from a peak of $585.70 to $563.50 an ounce, the lowest price since June 14.
Investors shunned energy futures and metal this week to chase the Dow Jones Industrial stock average to a new record on Wednesday at 11,833, surpassing the old high set on January 14, 2000, before the stock market bubble burst. "The market could easily target $550," said Mike Guido, commodities head of hedge fund marketing at Society General.
"The market is also struggling now with the strength in the Dow Jones. If the Dow does continue to move up through 12,000, you could have a reverse money flow through the balance of the year." The market buzzed about liquidation by one or more commodity trading funds. Replaced stop-loss sell orders were executed below $576.60/577, the previous low from mid-September, and again under $572, a floor source said.
"It seems like the bulk of stops was probably under $572 and the $570 area. But it managed to attempt a little pull back off the low. Oil still looks a little bit suspect," said James Quinn, commodities commentator at A.G. Edwards & Sons. "It was a technical break that was led by investment fund selling," he said.
Much of the action was on the e-cbot electronic platform, which has been popular with hedge funds and on some days takes more than half of the trading volume in gold futures. Comex estimated volume was 85,000 contracts, including 12,885 switches using two contracts. Turnover in the Chicago Board of Trade's electronically traded 100-oz gold contract was 69,472 contracts at 2:01 pm EDT (1601 GMT) (http://www.cbot.com/cbot/pub/page/0,3181,297,00.html). Dealers said momentum traders appeared to have been caught on the wrong sides of gold's wild ups and downs in recent days and exaggerating moves as they turned positions. Comex open interest rose 4,431 lots to 330,065 on Tuesday, showing new shorts being initiated as December gold fell $22.
The selling in gold seemed to abate when Nymex November crude recovered from an eight-month low to end up 73 cents at $59.41 a barrel on supplies worries caused by a firefight between Nigerian militants and troops near a Shell Oil pumping station in that Opec member nation.
Crude and gold have been tightly correlated in recent weeks, with gold responding to weaker oil prices as investors linked the two with inflation hedge strategies using gold. In the spot market, gold was quoted at $566.00/7.00, down from Tuesday's New York close at $576.50/577.50. London bullion dealers fixed on Wednesday's afternoon spot reference price at $573.60 an ounce.
Comex December silver went down 25 cents to $10.795 an ounce, after a 59.50-cent fall on Tuesday. The range was $11.06 to $10.65; it's weakest since September 15. Silver is off 9 percent from last on Thursday's 17-day high at $11.86. Spot silver fetched $10.78/0.85, down from $10.93/11.00 an ounce late on Tuesday.
The fix was $10.825. Nymex January platinum settled $47.50 lower at $1,077.40 an ounce. Spot platinum closed at its lowest price in almost six months, at $1,075.00/1,080.00 an ounce. December palladium fell $9.80 to $296.65 an ounce. Spot palladium declined to $289.00/294.00 per ounce.