Gold slid towards $930 an ounce in Europe on Monday as rising risk aversion boosted the dollar and knocked oil prices and equity markets lower. Meanwhile silver tumbled nearly 6 percent and was on track for its biggest one-day fall since January, as its decline on the back of falling gold prices was exacerbated by losses in industrial commodities.
Spot gold hit a low of $929.70 an ounce and was bid at $930.80 at 1507 GMT, against $945.85 late on Friday. US gold futures for December delivery on the COMEX division of the New York Mercantile Exchange fell $15.60 to $933.10. Spot silver was bid at a two-week low of $13.82 an ounce against $14.68 on Friday.
Silver hit a two-month high of $15.16 an ounce on Friday as a softer dollar and optimism over the economic outlook lifted precious metals early in the day. But prices fell in later trade as the dollar firmed, and the fall continued into Monday. "Gold and silver had a nice run, but there wasn't really anything fundamental to sustain that," said Mitsubishi Corp precious metals strategist Tom Kendall.
"The dollar turned around, and the physical markets are still pretty quiet," he added. "They were bid up by funds and speculators, but that ran out of steam." The dollar firmed versus a basket of major currencies as risk aversion rose in the wider markets, prompting buying of the US unit as a haven. Physical demand for gold also remained weak, with the largest bullion-backed exchange-traded fund, the SPDR Gold Trust, saying it saw no new inflows on Friday.
"Physical demand is not strong enough to absorb the selling," senior Commerzbank trader Michael Kempinski said. "We think we will see more (demand) at $925." Caution over the outlook for the global economy also battered stock markets, with European shares tumbling to a two-week low on Monday after retreating on Friday. US stocks also fell at the open. World stocks fell nearly 2 percent, with the benchmark MSCI world equity index heading for its biggest one-day loss since early July. The CBOE VIX index, seen as Wall Street's 'fear gauge', jumped 15 percent.
Base metals also slipped, pressuring silver, which as well as being bought as an investment metal like gold is also widely used in industries such as electronics manufacturing. "Silver was the big loser in the latest commodity sell-off," Standard Bank analyst Walter de Wet said in a note. "The metal has found good buying support from copper. However, with the red metal testing $6,000 again this morning and gold falling below $940, silver buying interest is limited."
In supply news, the world's number five gold miner, Harmony Gold Mining Co, announced its first dividend in five years and said output rose 1 percent in the first quarter. The world's biggest primary silver producer, Fresnillo, said its silver production is expected to rise 2-3 percent in 2010. Elsewhere platinum was at $1,212.50 an ounce, down more than 3 percent from $1,254.50 on Friday, while palladium also fell more than 3 percent to $263.50 versus $273.50.
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