US GOLD - Comex tumbles lower on fund liquidation after weak US jobs data

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Tom Jennemanntom.jennemann@fastmarkets.comSenior North American Correspondent973-204-3383

New York 20/12/2012 - Gold futures dropped sharply after a large Comex sell order was executed near the start of trade in New York and following the release of a disappointing US jobs report.

Gold for February delivery on the Comex division of the New York Mercantile Exchange was last down $14.00 at $1,653.70 per ounce, with the losses coming at just after 08:30 New York time.

“The market was pretty steady in Asian trade but we had a move down just as people were getting to their desks in New York. It looks like a fund may have liquidated a fairly sizeable position, possibility for year-end accounting reasons,” a US-based gold trader said.

“With all of the uncertainty surrounding the tax codes for 2013, it wouldn't be a shock to see some players trim their holdings in these last couple sessions of the year, which could lead to some price swings” a US-based gold trader said.

Downward pressure also came from weak data - US jobless claims rose by 17,000 to 361,000 in the week ended December 15, slightly above a forecast for a reading of 358,000.

The move lower came despite currency support - the euro was last up about three quarters of a cent at 1.3288 against the dollar, while Germany's DAX and France's CAC-40 were both near unchanged.

“More sellers appeared and we've seen more sell stops as we broke down into negative territory. Hopefully tomorrow we may have short covering Friday but for now it's more fund selling before the year-end due to sour fiscal cliff reports and taxes considerations,” RBC Capital Markets analyst George Gero said.

“We have now reached the $1,650 support area and we are now far from the $1,710 close we need to turn the market back up,” Gero added.

As for the more industrial commodities, light sweet crude (WTI) oil futures for February delivery were down 41 cents at $89.57 per barrel and the most actively traded Comex copper contract was at $3.5340 per pound, down 7.15 cents.

In the US, lawmakers have until the end of the year to reach a compromise on budgetary issues - inaction would trigger huge spending cuts and new taxes that could slow growth and tip the US economy back into recession. Although it appeared that a deal was starting to take shape earlier in the week, the progress has stalled over the past 24 hours.

“Fears that US fiscal cliff talks have temporarily broken down again leaves gold and other commodity markets off balance and many traders will be looking to action in the US equity markets for a signal on the status of those negotiations,” CME Group said in a market commentary.

As for the other precious metals, Comex silver for March delivery was last down 5.1 cents at $31.065 per ounce. Trade has ranged from $31.035 to $31.275.

Comex palladium for March delivery was last down $16.15 at $682.20 per ounce, while the February platinum contract on the Nymex was at $1,577.50 an ounce, down $15.40.

(Editing by Mark Shaw)
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