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Gold tanks below $820 on dollar surge, sell-stops

Tue Aug 12, 2008 1:46am IST
 
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By Frank Tang

NEW YORK (Reuters) - Gold tanked 4 percent to end below $820 an ounce on Monday, dropping to its cheapest level this year as a soaring dollar against the euro and chart-based sell-stops triggered a bout of long liquidation.

Bullion could still fall further in the near term during the less liquid summer sessions as prices dropped below major support levels and as the dollar continued to strengthen, dealers said.

"It's clearly a technical break. It's clearly the oil and the dollar/euro. You could see some panic here in the gold market now," said Bruce Dunn, vice president of trading at Auramet Trading in New Jersey.

Gold ended at $819.25/820.85 by New York's last quote at 2:15 a.m. EDT (1815 GMT), which marked the cheapest price since Dec. 27, 2007. It was down sharply from its previous close of $855.40/857.00 late in the U.S. market on Friday.

Jonathan Jossen, a COMEX floor trader in New York, said that some hedge funds and gold investors were reallocating their portfolios to the equity market after a good recent rally in stocks.

"Everybody's trying to get out the doors," Jossen said. He said gold could test the $780 an ounce level in the near term.

U.S. gold futures for December delivery settled down $36.50, or 4.2 percent, at $828.30 an ounce on the COMEX division of New York Mercantile Exchange.

Monday's losses were the biggest one-day percentage loss since March 19, when gold futures had plummeted 5.8 percent.   Continued...

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