US gold futures sank below $830 an ounce in Friday's post-settlement screen trade, reversing sharp initial gains as a wave of panic swept through global markets and prompted investors to dump assets across the board to meet their liquidity needs.
GOLD: December gold settled down $27.50, or 3.1 percent, at $859.00 an ounce on the COMEX division of the New York Mercantile Exchange, moving in a wide range of more than $100 an ounce. In after-hours electronic trade, December tumbled more than 6 percent to a five-day low of $829, after trading as high as $936.30 in early sessions which marked the strongest level in the past 2-1/2 months.
"It's total panic. People are so scared that they are looking to liquidate everything that has cash value and to stay away from everything," said Bruce Dunn, vice president of Auramet Trading. Gold sold off as investors needed to meet margin calls after US stocks fell sharply for an eighth straight session, with the Dow down 6 percent and Standard and Poor's 500 index down nearly 7 percent in afternoon trading.
A sudden surge in the dollar against the euro due to risk aversion accelerated selling in gold. Oil sank nearly $10 to below $80 per barrel, reducing gold's status as a hedge against inflation.
Volatile US stock markets supported buying in gold in early sessions. The Dow Jones industrial average had initially plummeted 8 percent before it sharply pared early losses to briefly turn positive. In the longer run, gold should outperform most other assets because of its appeal as a safe haven as financial turmoil persists - David Rinehimer, director at Citi Futures Perspective.
Investment demand in gold remained strong as holdings in the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, rose to a record 765.74 tonnes on October 9. Increased activity in the gold option markets showed that price volatility of bullion has "exploded" on Friday due to choppy trading in the stock markets - COMEX gold options floor trader Jonathan Jossesn.
COMEX estimated final volume at a busy 210,008 lots and option turnover at 22,302 lots. Spot gold drops to $845.80 an ounce, down 7.2 percent from $911.50 at 2:50 pm EDT (1850 GMT), Thursday's nominal close after bullion rallied in the overnight sessions based on a panic sell-off in stocks. The afternoon fix in London at $900.50 per ounce.
SILVER: NYMEX December ended down $1.275, or 10.7 percent, at $10.600 an ounce. December silver breached $10 an ounce in screen trade, ranging from a contract low of $9.40 to $12.355 an ounce on Friday. Less-liquid silver plunged in a widespread liquidation across all commodities. COMEX estimated final volume at 37,399 lots. Spot silver at $9.79/9.91 an ounce, down 18.5 percent from Thursday's nominal close of $12.01 an ounce. London silver fixed at $11.74 an ounce.
PLATINUM: NYMEX January platinum finished down $38.50, or 3.7 percent, at $1,005.20 an ounce. Platinum group metals dropped as signs of a global recession hurt demand for platinum catalytic converters for cars. Spot platinum at $985.50/1,004.50.
PALLADIUM: December palladium closed dow n $, or 3.5 percent, at $197.50 an ounce. Spot palladium at $186.50/199.50.