* 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 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
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
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