Tokyo gold futures fell sharply on Thursday, hitting a one-month low as plunges in oil prices induced heavy long liquidation by fund operators, with sentiment for precious metals deteriorating rapidly, traders said.
Platinum futures on the Tokyo Commodity Exchange (TOCOM) fell the daily 80-yen limit in most contracts, with the benchmark contract plunging to its lowest since July 29.
TOCOM silver futures also suffered massive liquidation, dropping the daily 7-yen limit across the board.
"Plunges in crude oil explain everything," said Tatsuo Kageyama, analyst at Kanetsu Asset Management.
"The surges in oil had backed the rises in gold and other precious metals but after seeing oil prices plunge so much, fund operators had to liquidate their massive positions in gold."
The benchmark October gold contract closed down 15 yen per gram at 1,448 yen. It dropped to as low as 1,444 yen, down more than 2 percent from this week's high of 1,477 yen.
At 0722 GMT, spot bullion was quoted at $424.40/4.90 an ounce against $423.55/4.30 in New York. On Monday, it hit a six-month peak of $430.20.
TOCOM platinum suffered bigger falls as lower liquidity than in gold exaggerated the downswing.
Unlike gold prices, which had held onto their bullish trend until Wednesday, platinum has been struggling throughout the week.
The white metal was under pressure on views that Japan's export-led economy could be undermined by an excessively strong yen, which cut demand for the metal that is mainly used in catalytic converters to remove pollution from car exhaust.
Japan's industrial production showed signs of weakness, possibly signalling caution among manufacturers, cooler demand for exports and a slower domestic economic recovery.
Domestic output fell 0.7 percent in September compared with a month earlier, government data showed on Thursday.
The figure was worse than the median forecast of a 0.5 percent gain in a Reuters survey of economists last week.
Traders said falls in TOCOM platinum picked up speed after the October contract broke below major technical support at 2,790 yen per gram.
"The mood is not good. We have to watch whether oil prices will fall further," said a trader at a Japanese trading house.
The October platinum contract closed 80 yen lower at a three-month low of 2,772 yen per gram.
All other contracts ended down the daily 80-yen limit, except for prompt December, which closed 70 yen lower.
Key US crude oil futures fell further in Asia following a larger-than-expected build in US crude stocks.
NYMEX crude oil for December delivery fell as low as $51.29 per barrel in ACCESS electronic trading, down more than 2 percent from the previous US close. Two-day losses now stand at more than 6 percent.
The dollar slumped to six-month lows against the yen as worries about the US economy lingered.
The weaker dollar had provided additional support to gold prices, but the plunges in oil prices overwhelmed the positive impact of the currency, traders said.
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