Wed Aug 24, 2011 5:06pm EDT
* Gold futures' biggest one-day price drop since 1980
* Futures volume looks headed for a record
* Strong U.S. durable goods orders dent safe-haven appeal
By Frank Tang
NEW YORK, Aug 24 (Reuters) - Gold futures fell more than
$100 on Wednesday, one of the steepest falls ever, as strong
U.S. economic data and expectations of more Federal Reserve
stimulus accelerated profit taking from the safe-haven record
high of a day ago.
Selling spiraled out of control as money managers competed
to liquidate positions in COMEX futures, which experienced
their biggest single-day dollar loss since 1980. Volume looked
like a record.
The price of gold bullion is now more than $150 below
Tuesday's all time high of $1,911.46 an ounce, downed by
intense speculation about whether the Fed will announce new
plans to ease monetary policy at a meeting late this week.
Analysts said it was time for gold investors to take money
off the table after the rally extended too far, too fast in
recent weeks. Bullion rose as much as $400 since July.
"You have a commodity that retail investors, hedge funds
and everybody were long, and the technical indicators showed it
was overbought. It was just a matter of time before the market
starts cracking," said Mihir Dange, COMEX gold options floor
trader for Arbitrage LLC.
Spot gold XAU= was down 4.1 percent to $1,754.59 an ounce
by 3:37 p.m. EDT (1937 GMT), off its session low of $1,749.39.
Before gold began recoiing Tuesday from above $1,900, it
had risen nearly 9 percent over six sessions.
U.S. gold futures for December delivery GCZ1 settled down
$104 at $1,757.30 an ounce. Reuters data showed that is the
biggest price drop of the continuous, front-month contract
since Jan. 22, 1980, when it tumbled almost $150. On a
percentage basis, it was the steepest fall since December 2008,
during the financial crisis.
COMEX futures volume topped 430,000 lots, on pace to
surpass a record from Aug. 9, preliminary Reuters data showed.
Silver XAG= dropped 5.9 percent to $39.34 an ounce.
Gold came under pressure after steadying overnight, after a
report showing new orders for U.S. durable goods orders rose 4
percent in July, more than expected and offering hope the
ailing economy could dodge a second recession. [ID:nN1E77N096]
Analysts warned of a sharp correction from this month's
rally was possible, especially if Friday's central bank meeting
at Jackson Hole, Wyoming does not result in a Fed announcement
of a third round of government bond buying, or quantitative
easing, also known as QE3.
"The correction really should be taking place now, because
of all the (bets) on the table," said Ashok Shah, chief
investment officer at London & Capital.
"But the journey is not complete until Jackson Hole is
done," Shah said. The Fed conference starts on Thursday.
CALL-PUT SPREAD NARROWS, MARGINS EYED
On the options front, the spread between the 25-day implied
volatility of COMEX gold and that of put options has narrowed
since Monday, a sign that gold option investors were turning
bearish.
src: http://www.reuters.com/article/2011/08/24/markets-precious-idUSL5E7JO1BP20110824
* Gold futures' biggest one-day price drop since 1980
* Futures volume looks headed for a record
* Strong U.S. durable goods orders dent safe-haven appeal
By Frank Tang
NEW YORK, Aug 24 (Reuters) - Gold futures fell more than
$100 on Wednesday, one of the steepest falls ever, as strong
U.S. economic data and expectations of more Federal Reserve
stimulus accelerated profit taking from the safe-haven record
high of a day ago.
Selling spiraled out of control as money managers competed
to liquidate positions in COMEX futures, which experienced
their biggest single-day dollar loss since 1980. Volume looked
like a record.
The price of gold bullion is now more than $150 below
Tuesday's all time high of $1,911.46 an ounce, downed by
intense speculation about whether the Fed will announce new
plans to ease monetary policy at a meeting late this week.
Analysts said it was time for gold investors to take money
off the table after the rally extended too far, too fast in
recent weeks. Bullion rose as much as $400 since July.
"You have a commodity that retail investors, hedge funds
and everybody were long, and the technical indicators showed it
was overbought. It was just a matter of time before the market
starts cracking," said Mihir Dange, COMEX gold options floor
trader for Arbitrage LLC.
Spot gold XAU= was down 4.1 percent to $1,754.59 an ounce
by 3:37 p.m. EDT (1937 GMT), off its session low of $1,749.39.
Before gold began recoiing Tuesday from above $1,900, it
had risen nearly 9 percent over six sessions.
U.S. gold futures for December delivery GCZ1 settled down
$104 at $1,757.30 an ounce. Reuters data showed that is the
biggest price drop of the continuous, front-month contract
since Jan. 22, 1980, when it tumbled almost $150. On a
percentage basis, it was the steepest fall since December 2008,
during the financial crisis.
COMEX futures volume topped 430,000 lots, on pace to
surpass a record from Aug. 9, preliminary Reuters data showed.
Silver XAG= dropped 5.9 percent to $39.34 an ounce.
Gold came under pressure after steadying overnight, after a
report showing new orders for U.S. durable goods orders rose 4
percent in July, more than expected and offering hope the
ailing economy could dodge a second recession. [ID:nN1E77N096]
Analysts warned of a sharp correction from this month's
rally was possible, especially if Friday's central bank meeting
at Jackson Hole, Wyoming does not result in a Fed announcement
of a third round of government bond buying, or quantitative
easing, also known as QE3.
"The correction really should be taking place now, because
of all the (bets) on the table," said Ashok Shah, chief
investment officer at London & Capital.
"But the journey is not complete until Jackson Hole is
done," Shah said. The Fed conference starts on Thursday.
CALL-PUT SPREAD NARROWS, MARGINS EYED
On the options front, the spread between the 25-day implied
volatility of COMEX gold and that of put options has narrowed
since Monday, a sign that gold option investors were turning
bearish.
src: http://www.reuters.com/article/2011/08/24/markets-precious-idUSL5E7JO1BP20110824
