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Comex gold falls to three-week low, departs range

NEW YORK: Comex gold broke down to a three-week low on Friday, smashing through support at $300 an ounce while platinum group metals continued to buckle under TOCOM's ironfisted crackdown on overspeculation.

Comex April gold closed down $6.30 at $294.60 an ounce, trading $301.20 to $293.50, the lowest intraday quote since Feb 4, the day news that Canada's Placer Dome would suspend gold hedging sent the contract soaring $37 to $326.90 on Feb 7.

The slide accelerated on the break below the $298.50 pullback low on Feb 8.

"We saw some fund selling down to the low and good physical demand still all the way down," said Donald Eckert, global bullion risk manager at Chase Manhattan.

Spot bullion was quoted late at $292.10/3.10, compared to the late fix at $294.00 and New York's previous close at $298.10/9.10.

Bullion traders said gold lost upward momentum after the market priced in other recent producer pledges to scale back forward sales and other hedging practices.

Market pricing is now starting to anticipate Britain's fifth and final scheduled 25-tonne gold auction under its plan to reduce reserves 58 percent from 715 tonnes. But few expect the March 21 sale to generate fireworks, given robust bullion demand and low volatility after the last bimontly sale.

Sliding silver futures also commanded attention for the second day running, nearing the important $5.00 level and reaching their lowest since June last year in response to a sudden ballooning of Comex warehouse stocks.

Active March silver, which starts delivery notices next week, tumbled 13 cents to $5.04 an ounce, touching $5.035 off a high of $5.19. Spot bullion last fetched $5.04/07, down from the fix at $5.15 and Thursday's late level around $5.15.

"Coming up to roll period, it looks like some of the funds instead of rolling are just getting out of their long," said Eckert, adding "There are rumours that 25 million ounces are coming on to the exchange. Eight million has already materialised."

Thursday's Comex inventories increased another 3,197,497 ounces to 86,167,111 ounces, having jumped 5,459,048 ounces Wednesday.

The market believes silver is being shipped from London, which is awash in metal, to ease tight conditions in New York, where stockpiles last month were at a 15-month low.

Nymex March palladium fell $8.40 to $689.00 an ounce and April platinum shed $15.90, settling at $452.10.

"People are just kind of quiet and waiting to see what's going to happen with the TOCOM situation," said a refinery dealer.

TOCOM's unprecedented move suspending free markets and freezing prices to allow panicky individual investors out of some deeply unprofitable shorts has raised questions about the future of trade on the world's biggest PGM futures market.

Among the consequences of the draconian measures could be court disputes between investors and brokers or investors and the exchange, Japanese traders said.

"(TOCOM) was an outlet for hedging and for speculating and if you take that away its going to hurt both of those markets," the refinery dealer said.

Until the selloff from record highs over $800 an ounce this week, the speculative frenzy over automaker demand and a lack of palladium from top-producer Russia had sent Nymex prices up more than 70 percent this month, doubling them since early December.-Reuters