US gold accelerated losses to end lower for the second straight session on Wednesday as the dollar strengthened and funds cut losses after the metal fell below technical supports.
Benchmark February gold at the Comex division of the New York Mercantile Exchange dropped $12, or 1.9 percent, to settle at $635.90 per ounce, trading in a range between $635.5 and $648.8.
Estimated Comex volume was 23,000 contracts, and options turnover was 10,000. Turnover in the Chicago Board of Trade's electronically traded 100-oz gold contract was 57,857 contracts as of 3:11 pm EST (2011 GMT) (http://www.cbot.com/cbot/pub/page/0,3181,297,00.html). Gold tumbled in late trade and failed to hold above $640. On Tuesday, it finished below $650 for the first time since it reached a 2-1/2-month high at $655.5 on Friday.
Leonard Kaplan, president of Prospector Asset Management, said gold slumped as funds executed stop-loss orders. "Once it went down to $638.50, you saw a lot of sell-stops being executed at that time, because this is a new low in the last week or two," Kaplan said.
Other traders said that short selling from commission houses and year-end profit taking pushed the yellow metal to end at a 10-day low on Wednesday. "The Asian market is pretty long right now. I think that there is some short selling going on upstairs in anticipation of weakness coming out of the Asian markets, and that's why the market has been drifting lower here," said Ralph despotise at RJ Futures.
The dollar rose against the euro and yen after a report showed the US private sector created more jobs than expected last month, suggesting that the labour market remained resilient and the economy was not slowing down. The ADP employment report for November showed 158,000 jobs were created, above economists' expectations for 125,000 jobs.
Joseph Gizzard at Saibu Commodities said gold's decline was "all dollar-related." A stronger greenback makes gold, which is priced in dollars, less attractive for holders of other currencies. "It's time of the year-end here. I think you are going to see a lot of people closing their books. You are going to see a lot of profit taking coming up the board," said Gizzard.
Gizzard pegged support at $635 for gold and $13.50 for silver. "We are into the end of the year. A lot of trading has slowed down. Technicals have turned the market south," said Carlos Perez-Sandal at Hudson River Futures. "The dollar seems to be holding, and maybe rebounding going into the Christmas season here. That has also soured some of the longs out here who saw the market meeting resistance at $650," Perez-Santa said. Looking forward, Kaplan was bearish on gold.
"The gold market was way too high. The funds had run it up and they'll run it down. And there is no physical buying at these prices. There is no reason for us to be at these prices. With oil relatively weak, I just don't see it," Kaplan said. The market now awaits the release of the November US unemployment rate and nonfarm payrolls at 8:30 am EST (1330 GMT) on Friday.
Spot gold bullion was quoted at $630.60/632.10, sharply lower than $642.30/$643.80 late on Tuesday. Bullion dealers put London's fix at $636.00. Nymex March silver tracked gold's decline, ending down 23 cents, or 1.6 percent, at $13.795 an ounce, a day after it closed at a six-month high above $14.
Spot silver was quoted at $13.57/13.64, down from Tuesday's late quote at $13.81/13.88. On Wednesday's fix was $13.68. Nymex January platinum settled down $8 at $1,125.70 an ounce. Spot platinum fetched $1,120.00/1,125.00. March palladium shed $6.30 to close at $330.10 an ounce. Spot palladium traded at $326/329.
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