US MIDDAY: gold tumbles October 12, 2013


Gold fell about 1.5 percent on Friday to its lowest in three months as an unusually large trade in the New York futures market prompted jittery investors to flee the bullion market on signs a deal might be near to avert a potential US debt default. The precious metal, generally viewed as a safe haven investment, fell abruptly in early US trading, with prices falling $30 an ounce in just minutes. Losses were also accelerated by technical stop-loss selling orders after gold fell below key support near $1,275.

Gold’s sudden slide sparked sell-offs in crude oil and copper futures, although they have since trimmed losses. Bullion’s drop stands in sharp contrast with higher US equities and a lower dollar as other investors were encouraged by the first signs of progress by US lawmakers to end the stand-off in Washington.

On Friday, President Barack Obama and congressional Republican leaders moved to end their fiscal impasse but struggled to strike a deal on the details for a short-term reopening of the federal government and an increase in the US borrowing limit. “If there is a temporary stop-gap measure to avert a disaster of US default, it will lead to gold market going even lower,” said Jeffrey Sica, chief investment officer of Sica Wealth, which manages over $1 billion of client assets.

Gold’s sudden price tumble was a result of hedge funds and institutional investors flooding the gold futures market with sell orders, traders said. US gold futures trading was momentarily halted at 8:42 am EDT (1242 GMT) by CME Group’s Stop Logic mechanism to prevent excessive price movements. In the three minutes around the ten-second trading pause, gold prices slid almost $30, or about 2 percent, with an unusually heavy turnover at nearly 20,000 contracts – about one-fifth of the market’s volume at the time.

US Comex December gold futures were down $28.80 at $1,268.10 an ounce by 12:05 pm EDT, with trading volume on track to exceed its 30-day average, preliminary Reuters data showed. Spot gold was down 1.4 percent at $1,268.21, having earlier fallen as much as 1.8 percent to its lowest since July 10 at $1,262.14 an ounce. The metal was down 3.4 percent on the week and headed for its second straight weekly loss – its sixth weekly decline in seven weeks.

Gold’s losses were triggered by a break below key support between $1,273-1,278, which represents the low from August 7, October 2, and the neckline of a head-and-shoulder continuation pattern, said Jonathan Krinsky, chief technical market analyst at Miller Tabak. Among other precious metals, silver fell 1.9 percent to $21.22 an ounce. Platinum was down 0.9 percent at $1,368.24 an ounce, while palladium rose 0.4 percent to $708.76 an ounce. Courtesy: Reuters

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