NY Gold, Silver Fall Sharply On Liquidation

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NY Gold, Silver Fall Sharply On Liquidation

Recent long liquidation continued in gold and silver futures Thursday, with technically oriented
selling accelerating the declines, analysts said.

They cited profit-taking in connection with the sharp loss in U.S. equities, plus an unwinding of so-called carry trades. Market watchers also cited general risk aversion. One added
that Comex gold and silver options expiration appeared  to add to the selling pressure.

December gold fell $11.40 to $675.10 an ounce on the Comex division of the New York Mercantile Exchange. As pit trade was closing, the December contract at the Chicago Board of Trade
was down $11.30 to $675.30.

A couple of traders reported that sell stops were hit.

A couple of key moving averages went through - both the 100-day average and the 20-day
moving averages.

Late in the session, the 100-day moving average for Comex December gold passed through
$684.60, while the 20-day average passed through $678.50.  Furthermore, the market fell
through the 50-day average around $675.90 and200-day average at $674.20.


December gold fell to a low of $666.30 and September silver to $12.755, their weakest levels
since July 6. At the session low of $666.30, December gold hadfallen $31.20, or 4.5%, so far
this week.

Meanwhile, Comex September silver fell 20 cents to $12.95. As it was closing, CBOT September silver was down 19.7 cents to $12.945.

Comex September silver fell through its 20-day average that was around $12.99after previously
falling below the 50-day average that was at $13.17 late in the session.

Another area where technical selling appeared was the July 17 low of$12.925, the next key
support areas would be around $12.49 and$12.24.

Historically, a sell-off in equities might have meant investors shifted funds into gold. In recent
months, however, there appears to be a tendency for investors to liquidate gold holdings in
order to raise cash when stocks fall dramatically.

Worries about the U.S. sub-prime market persist, people are thinking the U.S. economy might
slow more than currently expected, and that might bring down inflation concerns. That is
probably also weighing on the precious metals.

Some investors buy gold and silver as a hedge against possible inflation.