US gold futures sank to their cheapest level in two weeks early on Wednesday on a flood of investment fund selling due to technically overbought signals in the market and a stronger dollar, dealers said.
By 10:15 am EDT, December delivery gold was down $6.70 or 1.4 percent at $467.90 an ounce on the New York Mercantile Exchange's COMEX division, in a range of $474.50 to $467.10, which marked its cheapest level since October 5.
A desk trader in New York said technically based fund long liquidation had emerged to pressure prices, as the dollar rose and as speculators began to look overly long in futures.
Some traders have said that COMEX gold open interest standing near current historical highs signalled that funds had little buying power left now to boost prices further.
Open interest jumped 10,889 lots to 371,324 contracts in the latest data as of Monday's session.
Another precious metals dealer said gold had reached a bit of a technical top atop $475 an ounce while the dollar's gains this week created an opportunity for traders to take profits.
Brokers put next chart support in December gold at $465.90 and resistance up around $477.
Estimated COMEX volume was 25,000 lots at 10 am ABN Amro raised its average price forecast for 2005 by $5 to $440 an ounce, and to $485 for the full calendar year of 2006. It also said $500/oz could be tested sometime next year.
Bullion hit an 18-year high at $480.25 last week.
Spot gold tumbled to $465.50/466.20 an ounce, a low not seen since October 6, vs. Tuesday's New York close at $471.10/1.90. Wednesday's afternoon fix in London by bullion dealers was at $465.90.
December silver sank 11.0 cents to $7.725 an ounce, dealing from $7.835 to $7.69. Spot silver fell to $7.67/70 an ounce, from $7.76/79 previously. It fixed at $7.73.
NYMEX January platinum rose $1.70 to $936.40 an ounce. Spot changed hands at $930/934.
December palladium shed $1.75 to $210.50 an ounce. Spot was down at $205/208.