By Frank Tang
NEW YORK (Reuters) – Gold fell in light holiday trade on Tuesday as technical weakness, options-related selling and a lack of fresh economic news failed to stimulate buying interest in the final week of the year.
Selling related to the expiration of U.S. January gold options, which weighed on bullion despite rallies in crude oil, grains and a weaker dollar. A mixed bag of U.S. consumer confidence and home prices data kept investors on the sidelines.
Gold is on track for a 9 percent fall for December. Prices earlier in the month plunged below key technical support they had held for nearly three years, fueling fears that bullion was close to ending a more than decade-long bull run.
“Technically, a close above the 200-day moving average at $1,628 in spot gold is still needed to reinstate a bull market,” said Carlos Perez-Santalla, precious metals broker at PVM futures.
“The gold market will see odd movements this week as many money managers have closed out the year, leaving the market with technical and headline-sensitive traders,” he said.
Spot gold fell to a one-week low of $1,588.89 earlier in the session. It was down 0.8 percent at $1,592.80 an ounce by 2:06 PM EST.
Some traders sold in-the-money options ahead of the expiry of COMEX January gold options at Tuesday’s market close, said George Gero, vice president of RBC Capital Markets.
This year to date, gold is up 12 percent – one of the few investment assets that posted sizable gains in a rather difficult 2011 largely plagued by U.S. double-dip recession fears and the European debt crisis.
U.S. February gold futures settled down $10.50 at $1,595.50. Volume was below 50,000 lots, among the weakest turnover this year but consistent with the year-end trading volume last year.
TECHNICAL OUTLOOK WEAK
Adam Sarhan, chief executive of Sarhan Capital, said gold’s trading below its long-term rising trendline on weekly charts suggests bears remain in control.
The precious metal will have to either rise above its 200-day moving average or its key upward trendline – which has now become resistance – before another significant rally, Sarhan said.
Gold, which has recently taken to follow the equities market and riskier assets, largely ignored U.S. economic news including an eighth-month high in consumer confidence, and another report showing weak home prices.
Also weighing on sentiment was news that Chinese authorities would ban gold exchanges in the country outside of two in Shanghai. China and India are the top two consumers of physical gold.
Spot silver fell 1.2 percent to $28.69 an ounce.
Holdings of the iShares Silver Trust SLV, the world’s biggest silver-backed exchange-traded fund, declined nearly 1 percent on the day to 9,605.79 tons by December 23, the lowest since mid-July.
Among platinum group metals, platinum edged up 0.4 percent at $1,430.24, while palladium gained 0.5 percent to $660.99 an ounce.