High-flying gold crashes in record $100 freefall

**** 24 Sep, 2011, 10.22AM IST, Reuters ****

Gold crashed more than $100 lower on Friday, 23rd Sept 2011, as a slide turned into a freefall, with weeks of volatility, renewed strength in the dollar and talk of hedge fund liquidation wrecking its safe-haven status.

Widespread talk of possible selling by big hedge funds covering losses in other markets set off one of the biggest routs on record. Silver futures, which had attracted even more speculative funds over the past year, closed 18 percent down, the biggest daily loss since 1987.

Mounting fears this week of a global recession and a deepening Greek debt crisis made investors treat precious metals like any commodity, ignoring the safe-haven appeal that had made them a must-have in times of trouble.

Gold slumped more than 6 percent at one point -- its biggest slide since the financial crisis in 2008 -- to hit early-August lows as this week's losses accelerated. The selloff came even as stock and oil markets stabilized after Thursday's rout.

Adding to Thursday's losses, gold is down almost 9 per cent over the last two days, while silver has lost nearly 25 per cent. In the case of gold particularly, it was the third-sharpest daily loss in the past 20 years.

"I'm sure talk of hedge fund liquidation is helping to pressure things, though there's no confirmation of any single fund selling," said Jonathan Jossen, an independent COMEX trader.

Despite its steep losses this week, gold remained up 16 per cent year-to-date, thanks to gains from earlier months. But silver turned negative, with the spot price down almost 1 per cent for the year.

By 2:45 p.m. EDT (1845 GMT), the spot price of bullion was down 5.5 per cent at $1,641 an ounce, after falling to a session low under $1,628. The move was more than 5 standard deviations beyond the normal one-day change. At $127 an ounce, the intraday move was the biggest on record in dollar terms.

US gold futures' benchmark December contract on COMEX settled down 6 per cent, or more than $101, at under $1,640 an ounce.

Spot silver was down 14 per cent at a seven-month low below $31 an ounce.

Benchmark silver futures closed down nearly $6.50 at around $30.10 an ounce.

"We're making new lows and the bull case for gold is on pause for the near term," said Adam Klopfenstein, senior market strategist for precious metals at MF Global in Chicago.

"In the near term, the flight-to-quality interest in owning gold is also out of the window as people are not interested in buying it even in the face of fears in the economy. Until it stabilizes, I'm staying out of this market."

Gold appeared detached from almost every market, ignoring a mild dip in the US dollar index as the selling accelerated. The plunge took out several key technical supports, including the 100-day moving average for the first time since February.