NEW YORK: Gold plunged below $1,650 an ounce on Thursday, down more than 1 percent, and to its lowest since August as heavy liquidation by hedge funds and signs of an improving US economy triggered selling.
The metal broke below its 200-day moving average, which it had held for four months, as safe-haven bidding faded following a government report that showed the US economy grew at a faster-than-expected 3.1 percent annual rate in the third quarter.
Silver also dived over 3 percent and platinum group metals each fell around 2 percent.
Also weighing on gold was news Morgan Stanley Smith Barney has recommended its financial advisers pull client money out of long-time gold bull John Paulson's funds. The announcement stirred speculation the billionaire hedge-fund manager might need to liquidate gold investments.
"There is a concern among the hedge funds that they will have more redemptions because of the fact that they underperformed the markets this year as a whole," said Jeffrey Sica, chief investment officer of SICA Wealth Management which has over $1 billion in assets.
Spot gold was down 1.1 percent at $1,647.40 an ounce by 4:13 p.m. EST (2113 GMT), having hit a low of $1,635.09, which marked the weakest since Aug. 22.
Silver, which often displays higher volatility than gold, was down 3.4 percent to $29.94, having hit a four-month low of $29.60 an ounce.
Bullion has now fallen 3 percent in the last three sessions, partly pressured by uncertainty related to efforts by US legislators to clinch a deal to avert automatic tax hikes and spending on Jan. 1.
Gold has failed to benefit as a safe haven even though a year-end deadline for the "fiscal cliff" looms. On Thursday, Republicans in the US House of Representatives pushed ahead a "fiscal cliff" plan that stands no chance of becoming law as time runs short to reach a deal with President Barack Obama to avert a Washington-induced economic recession.
After this week's sharp sell-off, bullion is on track to end the fourth quarter down 7 percent, which would be its worst quarterly performance since the second quarter of 2004.
OPTIONS, TECHNICAL OUTLOOK BEARISH
Heavy concentration of put options under $1,700 an ounce added significant pressure on the underlying gold futures. Many investors have accumulated puts at lower prices to protect their gains in gold futures.
On charts, Thursday's sell-off sent gold's 14-day relative strength index to 25, the area which is considered by most analysts as oversold, for the first time since May.
US COMEX gold futures for February delivery settled down $21.80 at $1,645.90 an ounce, with volume in line with its 30-day average, preliminary Reuters data showed.
Year to date, gold was up around 5 percent. It was up as much as 15 percent earlier this year on worries that monetary easing by the Federal Reserve could spur inflation.
Among platinum group metals, platinum dropped 2.7 to $1,544.50 an ounce, while palladium slipped 2.1 percent to $676.50.
Center>Copyright Reuters, 2012
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