US MIDDAY: gold drops

Gold fell on Friday as the deepening eurozone debt crisis weighed on a number of markets and put the precious metal on track for its second consecutive weekly loss. Added pressure came from technical selling and gains in the dollar, Gold's technical outlook remained vulnerable as it has failed to close above $1,700 an ounce all week and traded below its 100-day moving average, a key support it held for a month until a breach after Monday's 2.5 percent loss.
"If we don't get substantially higher very quickly, I think we can see a sell off back into the low $1,680s. Buying could dry up very quickly because of the early close in New York," said Frank McGhee, head precious metals trader of Integrated Brokerage Services LLC.
Even though gold has recently followed riskier assets, physical bullion held by global exchange-traded funds rose to a record high this week, indicating some safe-haven buying by jittery investors. A surge in yields on Italy's debt sparked a sell off in global markets Friday.
Spot gold was down 0.4 percent at $1,687.39 an ounce by 11:52 am EST (1652 GMT), off an early session low of $1,671.59. US gold futures for December delivery were down $7.20 at $1,688.70 an ounce. Volume has exceeded its 30-day norm all week, preliminary Reuters data shows, reversing a recent weaker trend. Open-outcry and electronic trading of US precious metals futures will be closing early on Friday in observance of Thursday's US Thanksgiving Day holiday.
Underpinning bullion investor sentiment was news central banks bought nearly 26 tonnes of gold in October, boosted by a nearly 20-tonne purchase by Russia as well as buying from Mexico, Belarus and Colombia, data from the International Monetary Fund showed. Traders said that gold's losses were limited after France and Germany agreed on Thursday to stop arguing over whether the European Central Bank should do more to help markets.
France has called for the ECB to intervene massively to counter a market stampede out of eurozone government bonds, while Germany said the EU treaty bars it from acting as a lender of last resort. The precious metal is used by investors as a store of value against market stimulus programs and money printing by central banks.
In the investment sector, global holdings of gold ETFs have risen by more than 300,000 ounces this week to hit an all-time high of 69.978 million ounces, following hefty inflows into large US funds such as the SPDR Gold Trust, the world's largest, and COMEX Gold Trust. Silver fell 1.8 percent to $31.20 an ounce. The silver price, which often moves in tandem with gold, is set for a near-9 percent fall in November. Platinum eased 0.5 percent at $1527.49 an ounce, while palladium fell 1.4 percent to $566.83.