US gold futures fell early on Thursday on liquidations by funds, and the precious metal failed to attract any flight-to-quality buying as a wave of risk aversion hit the financial markets across the board.
"This is not about a commodity. This is not about gold. This is about investors getting out of everything," said Leonard Kaplan, president of Prospector Asset Management in Evanston, Illinois.
At 10:33 am EDT (1433 GMT), most-active gold for August delivery on the COMEX division of the New York Mercantile Exchange was down $3.50 at $670.30 an ounce. It hit a session low of $666.30, a one-week low, after setting a high of $677.40 in early trade.
Kaplan noted that gold did not draw any safe-haven bids during the latest sell-off on risk aversion. He expected the latest wave of flight to safety in the financial markets would not end soon. US stocks opened sharply lower on Thursday, extending sharp losses from Wednesday, as jittery investors fled riskier assets on worries about the worsening housing slump and the economy's credit condition.
The yen rose on Thursday, climbing to three-month highs against the dollar, as investors spooked by growing credit market problems sold risky assets. On Wednesday, gold futures finished $11 lower as a sharp recovery in the dollar prompted heavy liquidations.
Selling pressure related to Thursday's gold futures option expirations, and ahead of August gold contracts' first notice day next Tuesday, weighed on the market, analysts said.
Option expirations added volatility to the market because of the interaction of different trading strategies by investors, while investors have to decide whether to roll the current benchmark August contracts into next-active December futures, creating extra buzz in the marketplace.
Firmer energy prices also failed to support gold. US oil futures jumped about $1 to just below $77 a barrel on Thursday. On Wednesday, a more-than-$2 rally in oil failed to halt gold's sell-off.
"Given the strong positive correlation between oil and gold over the last several years, we expect that continued strength in the oil sector, should it materialise, would at the least provide underlying price support to gold," James Steel, analyst at HSBC in New York, said in a client note. Spot gold was quoted at $669.30/670.10 an ounce, sharply lower than $674.40/675.20 late Wednesday. The London afternoon gold fix was $670.00.
COMEX September silver was down 7.0 cents at $13.080 an ounce, trading between $12.880 and $13.235. Spot silver was quoted at $13.00/13.04 an ounce, compared with $13.08/13.13 late Wednesday. London silver was fixed at $13.13.
NYMEX October platinum edged up 10 cents at $1,331.00 an ounce. Spot platinum fetched $1,315/1,319 an ounce. September palladium was $2.05 lower at $366.25 an ounce. Spot palladium was quoted at $364/368 an ounce.
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