New York gold futures fell sharply on Friday along with other metals, oil and agricultural commodity futures amid widespread talk that a large fund was liquidating all commodity positions as the quarter was ending, and drew other sellers into the fray, traders said.
"There is all sorts of talk going around the desks that a long/short fund got blown out. Apparently they had long positions at higher levels," said one precious metals trader.
Active US gold futures for April delivery on the Comex division of the New York Mercantile Exchange slid 23.10 cents or 2.4 percent to $925.70 an ounce by 12:20 pm EDT (1620 GMT), falling as low as $921.8. It came off a $951.10 high hit early in the session.
One precious metals dealer said he thought some participants were selling their holdings to record profits ahead of the quarter end. "We saw gold coming off when some profit taking was going on and the better-than-expected US economic news today.
Platinum was up in the morning and dropped afterwards, but fundamentals for platinum are strong," the dealer said. A tame inflation reading, improved personal income data and dollar strength on the news pressured gold, he said.
The dollar extended gains against the yen and trimmed losses versus the euro after February US personal income rose 0.5 percent, higher than the 0.3 percent rate expected which matched the January rate.
The key Core PCE price index within the report showed a tame 0.1 percent gain, in line with market forecasts and down from a 0.3 percent increase in January. Meanwhile, the final March reading for Reuters/University of Michigan's US consumer sentiment gauge edged down to 69.5 from 70.8 previously, and was just below an outlook for 70.
Some traders said selling from the liquidating fund was overpowering any fundamental reasons for the decline. "I heard that a commodity fund had to liquidate their positions. Monday is the last day of the quarter. I would have thought things were going higher. But oil is down, gold is down. If you look at everything, it's down. A lot of softs had huge swings, they're all down," said one broker. A slide in energy prices added to gold's woes.
US crude oil futures fell by more than $2 Friday morning as oil exports flow from the Iraq city of Basra returned to normal after a bomb attack on a pipeline on Thursday.
At 12:25 pm EDT (1625 GMT) on the New York Mercantile Exchange, crude for May delivery was down $2.48, or 2.3 percent at $105.10, after trading from $107.63 to $104.79. Spot gold fell more than 2 percent on Friday, as a drop in oil prices prompted investors to liquidate their trading positions before the end of the quarter, traders said.
The metal fell as low as $924 an ounce and was quoted at $926.70/927.50 at 1627 GMT, against $951.80/852.60 in New York late on Thursday. Comex May silver tumbled 68.50 cents to $17.87 an ounce. It traded between $17.745 and $18.59. Spot silver fell to $17.80/17/85 an ounce, well below $18.50/18.55 at Thursday's close. Silver was fixed in London at $18.36 an ounce.
The Nymex platinum contract for April delivery lost $38.80 or 2 percent to $2,004.90 an ounce. Spot platinum fetched $2,010/2,020 an ounce. Platinum futures are about 14 percent below their $2,308.80 record high reached on March 4. Nymex June palladium was off $8.80, or 1.94 percent, at $445.0 an ounce. Spot palladium was at $439/447.
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