Gold futures in New York dropped sharply for a fourth straight session on Friday due to a combination of weaker energy prices, chart-based selling and book squaring on the last day of November. A bearish report by Goldman Sachs, which recommended investors to sell gold in 2008, also took a toll on market sentiment, traders said.
"Definitely technical selling more than anything else at these levels. I think you're seeing some near-term support breached in gold, and what you're seeing is just general technical sell-off at this point," said Zachary Oxman, senior trader with Wisdom Financial in Newport Beach, California.
At 10:32 am EST (1532 GMT), most-active February gold on the COMEX division of the New York Mercantile Exchange slid $14.60 or 1.8 percent to $787.70 an ounce, trading between $786.10 - which marked a 10-day low - and $806.20.
"You might not see a ton of directions because a lot of traders are lightening up, or even out of positions. But you will see a big spike in volatility today across the board," said Oxman, referring to contract rollover and dealers closing their books at the year end.
The first day for December delivery notices is Friday, and there was heavy deliveries for COMEX gold and silver. Selling before the start of delivery period for December futures contracts has catalysed recent losses in gold futures, as investors liquidate positions rather than roll them over to later months.
The February contract hit a contract peak of $855 on November 7 and a three-week high of $844.20 on Monday. It has fallen more than $50 from its Monday high. "Gold's weakness was due to end-of-the-month profit taking as well as Goldman Sachs putting out a sell recommendation," said Carlos Perez-Santalla, a COMEX floor trader with Hudson River Futures in New York.
Goldman Sachs told clients in a note on Thursday that they should sell gold in 2008 to take advantage of falling prices as the dollar steadies, naming the strategy as one of its top 10 tips for next year.
Gold's losses were accelerated on Friday as sliding crude oil prices dented the metal's appeal as a hedge against inflation. Spot gold was quoted at $780.50/781.30 an ounce, compared with $795.00/795.80 in New York Thursday afternoon. London bullion dealers fixed the afternoon spot reference price at $783.50.
COMEX March silver was down 44.50 cents or 3.1 percent to $14.000 an ounce, trading between $13.965 and $14.455. Spot silver was quoted at $13.81/13.86 an ounce, compared with $14.23/14.28 late Thursday in New York. London silver was fixed at $14.230. NYMEX January platinum was down $2.00 at $1,437.50 an ounce. Spot platinum was quoted at $1,438/1,442. March palladium dropped $2.10 to $348.00 an ounce. Spot palladium fetched $347/351.