PRECIOUS-Gold down for week on recession, fiscal crisis fears

Sat Nov 17, 2012 2:22am IST

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* Gold under liquidation pressure on equities sell-off
    * Option dealers expect gold losses limited
    * US fiscal talk, Israeli-Palestinian conflict eyed
    * Coming up: U.S. existing home sales Monday


    By Frank Tang
    NEW YORK, Nov 16 (Reuters) - Gold eased on Friday and posted
a sharp weekly loss as signs of global economic slowdown and
fears of a U.S. recession dented bullion's inflation-hedge
appeal.
    The metal posted a 1 percent drop this week and has fallen
in five out of the past six weeks. News that the euro zone swung
into a recession, disappointing U.S. economic data and Federal
Reserve Chairman Ben Bernanke's negative outlook on the housing
recovery all kept pressure on gold. 
   
    Gold sagged as the S&P 500 equities index was on
track for its largest two-week drop in about six months. Fears
that the United States could lapse into recession if a
combination of scheduled tax hikes and spending cuts is allowed
to go forward weighed on all markets, analysts said.
    "The severity of the recent equities decline has cast a
shadow of fear over gold investors that continued capitulation
in the stock market will force leveraged accounts to sell gold,"
said Jeffrey Sica, chief investment officer of Sica Wealth,
which manages over $1 billion in assets.
    Spot gold edged down 0.2 percent to $1,712.60 an
ounce by 3:04 PM EST (2004 GMT), after it hit a one-week low of
$1,704 on Thursday.
    On the options front, heavy selling of a call spread between
$1,700 and $1,670 an ounce for a low premium suggested dealers
expected the market would not fall much lower, TD Bank precious
metals strategists said in a note.
    U.S. equities edged up on Friday after Congressional leaders
vowed to find common ground on taxes and spending that would
allow them to head off the looming fiscal crisis after their
meeting with President Barack Obama. 
    Gold's safe-haven status could shine in the case of failed
talks and political paralysis, analysts said. Extreme fears over
the first fiscal crisis last year and a downgrade of the U.S.
credit rating ultimately sent gold to its record high of
$1,920.30 an ounce in September.
    Also underpinning gold was rising geopolitical tension in
the Middle East due to escalating rocket attacks between Israel
and Palestinian militants. 
    U.S. COMEX gold futures for December delivery settled
up 90 cents at $1,714.70 an ounce. Trading volume was in line
with its 30-day average, preliminary Reuters data showed.
    Silver dropped 1.1 percent to $32.22 an ounce.
    
    PHYSICAL, INVESTMENT DEMAND EYED
    Gold fell this week after a report from trade group World
Gold Council showed that global gold demand dropped 11 percent
in the third quarter from record levels in the same period last
year. 
    Gold investment demand, however, remains resilient. Holdings
of the SPDR Gold Trust, the world's No. 1 gold-backed
exchange-traded fund, rose to a level just shy of the record
high hit in October.
    Platinum group metals also fell after the end of strikes
that swept South Africa's mining sector.
    Platinum was down 0.9 percent to $1,555.74, while
palladium dropped 0.8 percent to $623.97.
    
 3:04 PM EST     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold DEC   1714.70   0.90   0.1  1705.60 1717.20  125,246
 US Silver DEC   32.37 -0.304  -0.9   32.015  32.680   39,696
 US Plat JAN   1561.80 -11.50  -0.7  1546.40 1576.70    7,277
 US Pall DEC    626.45  -4.75  -0.8   619.30  633.15    4,234
                                                               
 Gold          1712.60  -2.59  -0.2  1706.45 1716.90         
 Silver         32.220 -0.370  -1.1   32.060  32.670
 Platinum      1555.74 -13.50  -0.9  1546.50 1572.00
 Palladium      623.97  -5.25  -0.8   621.90  631.50
                                                               
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        152,161   152,190   176,556     14.62   -0.61
 US Silver       53,204    43,264    56,069     22.35   -1.10
 US Platinum      7,501     8,807     9,482     18.93    0.64
 US Palladium     4,989     3,820     4,546
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