US MIDDAY: gold sinks

Gold sank more than 2 percent early on Wednesday to its lowest since mid-2010, potentially opening the way for a fall to $1,000 as a surging dollar and stronger share prices weakened the investment case for non-yielding bullion. Silver's fall of around 5 percent was even sharper, with the metal hitting its weakest since February 2010 at just above $15 an ounce.
Spot gold skidded to its lowest since April 2010 at $1,137.40 an ounce and was trading down 1.8 percent at $1,146.40 by 1538 GMT. Technical analysts said a test of the $1,000 level could be on the cards following a break of support at $1,150 an ounce, a key retracement of gold's rally from its 2008 lows to its September 2011 record high at $1,920.30.
The metal has lost around $100 an ounce over the past week, rekindling memories of a stunning two-day drop last year that started a huge wave of divestment and a surprise double-digit annual price dive after 12 years of gains. US gold futures fell $21.80 an ounce to $1,145.80. Silver fell as much as 5 percent to a 4-1/2 year low of $15.13 an ounce, and was down 4.6 percent at $15.25 in late afternoon business.
"This year everybody got used to the idea that gold is not as exciting an investment as it used to be, provided that we continue to see benign inflation, economic growth, a stronger dollar," Credit Suisse analyst Karim Cherif said. "As long as you don't have some kind of political or financial fear there is no real incentive to hold gold so you better look somewhere else."
Analysts said investors were rushing for downside protection through gold options. Comex data on Tuesday showed open interest in $1,075 December put options, which give buyers the option to sell at that price, had surged more than 3,500 lots over the past few sessions. Underscoring bearish investor sentiment towards bullion, holdings in SPDR Gold Trust, the top gold-backed exchange traded fund, slumped to a six-year low of 738.82 tonnes.
Physical buying of jewellery, coins and bars - which usually picks up at lower prices - has not emerged robustly enough in Asia to put a floor under prices. Precious metals could see further downside, especially around the release of US jobs report on Friday, traders said. A strong report could further boost economic optimism and the dollar. The gold/silver ratio, which measures the number of silver ounces needed to buy an ounce of gold, hit its highest since early 2009 at 75 to one, also unleashing demand for silver coins and bars. Among the other precious metals, platinum fell 1.2 percent to $1,201.50 an ounce, close to its lowest since 2009, while palladium fell 3.1 percent to $758.47 an ounce.