PRECIOUS-Gold below $1,650/oz, down 1.1 pct on fund selling

Fri Dec 21, 2012 3:19am IST

* Breaks below 200-day moving average first time in 4 months
    * Gold down 3 pct in last three days, options turn bearish
    * Hedge fund selling, better U.S. GDP growth weigh
    * RSI shows gold oversold for first time since May
    * Coming up: U.S. personal income, core PCE price index Fri.

 (Adds markets details, updates prices)
    By Frank Tang
    NEW YORK, Dec 20 (Reuters) - Gold plunged below $1,650 an
ounce on Thursday, down more than 1 percent, and to its lowest
since August as heavy liquidation by hedge funds and signs of an
improving U.S. economy triggered selling.
    The metal broke below its 200-day moving average, which it
had held for four months, as safe-haven bidding faded following
a government report that showed the U.S. economy grew at a
faster-than-expected 3.1 percent annual rate in the third
quarter. 
    Silver also dived over 3 percent and platinum group metals
each fell around 2 percent.
    Also weighing on gold was news Morgan Stanley Smith Barney
has recommended its financial advisers pull client money out of
long-time gold bull John Paulson's funds. The announcement
stirred speculation the billionaire hedge-fund manager might
need to liquidate gold investments. 
    "There is a concern among the hedge funds that they will
have more redemptions because of the fact that they
underperformed the markets this year as a whole," said Jeffrey
Sica, chief investment officer of SICA Wealth Management which
has over $1 billion in assets.
    Spot gold was down 1.1 percent at $1,647.40 an ounce
by 4:13 p.m. EST (2113 GMT), having hit a low of $1,635.09,
which marked the weakest since Aug. 22.
    Silver, which often displays higher volatility than
gold, was down 3.4 percent to $29.94, having hit a four-month
low of $29.60 an ounce.
    Bullion has now fallen 3 percent in the last three sessions,
partly pressured by uncertainty related to efforts by U.S.
legislators to clinch a deal to avert automatic tax hikes and
spending on Jan. 1.
    Gold has failed to benefit as a safe haven even though a
year-end deadline for the "fiscal cliff" looms. On Thursday,
Republicans in the U.S. House of Representatives pushed ahead a
"fiscal cliff" plan that stands no chance of becoming law as
time runs short to reach a deal with President Barack Obama to 
avert a Washington-induced economic recession. 
    After this week's sharp sell-off, bullion is on track to end
the fourth quarter down 7 percent, which would be its worst
quarterly performance since the second quarter of 2004.
    
    OPTIONS, TECHNICAL OUTLOOK BEARISH
    Heavy concentration of put options under $1,700 an ounce
added significant pressure on the underlying gold futures. Many
investors have accumulated puts at lower prices to protect their
gains in gold futures.
    On charts, Thursday's sell-off sent gold's 14-day relative
strength index to 25, the area which is considered by most
analysts as oversold, for the first time since May.
    U.S. COMEX gold futures for February delivery settled
down $21.80 at $1,645.90 an ounce, with volume in line with its
30-day average, preliminary Reuters data showed.
    Year to date, gold was up around 5 percent. It was up as
much as 15 percent earlier this year on worries that monetary
easing by the Federal Reserve could spur inflation.
    Among platinum group metals, platinum dropped 2.7 to
$1,544.50 an ounce, while palladium slipped 2.1 percent
to $676.50.
 4:13 PM EST     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold FEB   1645.90 -21.80  -1.3  1636.00 1672.80  176,159
 US Silver MAR  29.678 -1.438  -4.6   29.635  31.275   74,103
 US Plat JAN   1546.20 -46.70  -2.9  1542.00 1595.50   18,544
 US Pall MAR    680.25 -18.10  -2.6   672.00  696.50    6,433
                                                               
 Gold          1647.40 -19.16  -1.1  1635.09 1671.51         
 Silver         29.940 -1.050  -3.4   29.600  31.220
 Platinum      1544.50 -42.49  -2.7  1545.50 1592.75
 Palladium      676.50 -14.54  -2.1   675.50  693.00
                                                               
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        184,570   180,432   174,396     12.98   -0.12
 US Silver       87,807    58,723    52,585      22.2    1.55
 US Platinum     25,957    10,653     8,902     17.86   -0.55
 US Palladium     6,483     6,221     4,737                  
                                                               
 

 (Additional reporting by Jan Harvey and David Brough in London;
Editing by James Dalgleish and Bob Burgdorfer)
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