Oct 11 2011

(Reuters) – Gold dropped on Tuesday, giving up some of the previous day’s gains as bullion investors sold on uncertainty ahead of a key vote in Slovakia on expanding theeuro zone rescue fund.
Bullion fell with industrial metals led by copper ahead of the Slovakia results, the only country of the 17-member bloc which has not yet ratified a pact to boost the size and powers of the European Financial Stability Facility. Wall Street seesawed to trade flat after recent rallies.
Trading of U.S. gold futures was extremely thin for the second straight day, indicating indecision by some bullion investors after the metal has moved in sync with risk assets with its traditional safe-haven status absent.
“There is an incredible amount of headline risk at the moment because of the unclarity behind all the news out of the EU that may underpin gold or cause gold to sell off,” said Fred Schoenstein, precious metals trader of Heraeus Precious Metals Management.
“There is no real clear direction in which gold should trade.”
Spot gold was down 0.6 percent at $1,664.99 an ounce by 3:04 p.m. EDT. During the past five sessions, bullion was still 2 percent higher as economic optimism has lifted the equity markets as well as gold.
A day after a broad rally of the so-called riskier assets such as equities and commodities, copper fell 2 percent Tuesday on demand worries over the euro zone debt crisis, which also weighed down on gold.
U.S. gold futures for December delivery settled down $9.80 an ounce at $1,661. Trading volume was higher than Monday’s but more than 50 percent below its 30-day norm.
Commerzbank said in a note that gold futures investors are more interested in speculating on bullion’s upside than buying the metal as a safe haven.
“It is also therefore by no means certain that the gold price would benefit should the eurozone debt crisis escalate again. We regard the upward potential for gold as exhausted in the short term,” the bank said.
On weekly charts, gold should remain under pressure due to a bearish double-top pattern, which could only be offset until prices rise above $1,700 an ounce, said Adam Sarhan, chief executive of Sarhan Capital.
(Graphic: r.reuters.com/mad44s)
Bullion investors are also more cautious after news that hedge fund manager John Paulson lost more money in September.
More liquidation could be possible in the gold market as Paulson’s investors now have less than one month left to decide whether to pull their money out of the firm’s biggest Advantage Funds by the October 31 notice deadline, traders said.
PHYSICAL DEMAND BRISK
The precious metal is still seeing good physical demand at lower prices, particularly from major buyers China and India. But it has struggled to gain traction as prices rise, analysts said.
Demand for physical gold picked up considerably as prices fell more than 20 percent from last month’s record highs above $1,920 an ounce.
Premiums for gold bars in Hong Kong stood at around $3 an ounce, their highest since at least February, while the premium in Tokyo held at 50 cents, dealers said.
Higher premiums on physical gold products could reflect supply tightness in regional markets.
Among other precious metals, silver was up 0.4 percent at $32.15 an ounce. Spot platinum was down 1 cent at $1,516.49 an ounce, while spot palladium was down 1.3 percent at $602.22 an ounce.
3:04 PM EDT LAST/ NET PCT LOW HIGH CURRENT
SETTLE CHNG CHNG VOL US Gold DEC 1661.00 -9.80 -0.6 1655.40 1686.70 100,799 US Silver DEC 31.998 0.018 0.1 31.350 32.580 27,985 US Plat JAN 1518.80 -6.30 -0.4 1511.10 1547.50 5,289 US Pall DEC 604.30 -10.00 -1.6 597.85 619.00 1,382
Gold 1664.99 -9.95 -0.6 1654.70 1684.36 Silver 32.150 0.120 0.4 31.380 32.490 Platinum 1516.49 -0.01 0.0 1512.15 1541.24 Palladium 602.22 -8.06 -1.3 599.77 615.50
TOTAL MARKET VOLUME 30-D ATM VOLATILITY
CURRENT 30D AVG 250D AVG CURRENT CHG US Gold 106,442 228,510 203,914 35.7 1.55 US Silver 29,649 57,157 83,385 58.49 -3.51 US Platinum 5,328 12,211 7,656 25 2.00 US Palladium 1,387 4,009 4,545
(Editing by Bob Burgdorfer and Sofina Mirza-Reid)
 http://www.reuters.com/article/2011/10/11/us-markets-precious-idUSTRE78M11C20111011