* Gold prices down but hold well despite Wall St sell-off
* Volatility index rallies, highest since July
* Gold BUGS index down as much as 5 pct in stocks rout
(Recasts, updates comments, closing prices, market activity,
changes dateline from LONDON)
By Frank Tang
NEW YORK, Oct 30 (Reuters) - Gold prices dropped on Friday
amid a sharp equities sell-off, driven by renewed worries that
the nascent economic recovery might not be sustainable.
Gold prices posted their first weekly losses since the week
of Sept. 25, following four consecutive weeks of gains.
Historically, gold moves in opposite direction to stocks
because of bullion's appeal as a safe haven amid economic
crises. But gold recently has climbed in tandem with rising
equities amid currency and inflation worries.
Mark O'Byrne, a director at bullion dealer GoldCore, said
that gold's inverse correlation with equities should hold in
the longer term.
U.S. December gold futures <GCZ9> settled down $6.70 at
$1,040.40 an ounce on the COMEX division of the New York
Mercantile Exchange.
Spot gold <XAU=> was at $1,040.85 an ounce at 2:58 p.m. EDT
(1858 GMT), against $1,044.95 late in New York on Thursday.
The dollar rose on safe-haven buying after steep losses in
the previous session. Gold moves in a close inverse
relationship with the dollar, as the metal becomes cheaper for
holders of other currencies when the U.S. unit weakens. []
The euro-dollar rate has moved in recent sessions in line
with risk appetite, with the U.S. currency tending to benefit
from rising risk aversion and falling share prices.
Jonathan Jossen, a COMEX gold options floor trader, said
that investors have been selling everything from stocks to
commodities and gold, as the dollar index <.DXY> climbed to
near 78, a technical breakout level.
GOLD EQUITIES TUMBLE
Wall Street stocks slid on Friday as reports painting a
mixed economic picture dashed hopes brought by the economy's
return to growth. []
Meanwhile, the Gold BUGS (Basket of Unhedged Gold Stocks)
index, a gauge of gold mining stocks commonly called the HUI
index <.HUI>, tumbled as much as 5 percent amid the equities
rout.
Holdings of the world's largest gold-backed exchange-traded
fund, New York's SPDR Gold Trust <GLD>, were unchanged on
Thursday after three sessions of declines. []
Among other precious metals, spot silver <XAG=> was at
$16.21 and ounce, against $16.63 an ounce late on Thursday.
The world's largest silver ETF, the iShares Silver Trust in
New York, said it had an inflow of 131.43 tonnes on Thursday.
[]
As well as strong investment buying, traders said they were
also seeing a pick-up in industrial demand for silver. The
metal is primarily industrial in application, and is widely
used in electronics manufacturing.
Platinum <XPT=> was at $1,319.50 an ounce against
$1,337.50, while palladium <XPD=> was at $320 against $325.50.
Close Change Pct 2008 YTD
Chg Close % Chg
US gold <GCZ9> 1040.40 -6.7 -0.6 884.3 17.7
US silver <SIZ9> 16.255 -0.400 -2.4 11.295 43.9
US platinum <PLF0> 1326.30 -11.90 -0.9 941.50 40.9
US palladium <PAZ9> 323.25 -5.05 -1.5 188.70 71.3
Prices at 2:57 p.m. EDT (1857 GMT)
Gold <XAU=> 1041.40 -3.55 -0.3 878.20 18.6
Silver <XAG=> 16.27 -0.36 -2.2 11.30 44.0
Platinum <XPT=> 1319.50 -18.00 -1.3 924.50 42.7
Palladium <XPD=> 320.00 -5.500 -1.7 184.50 73.4
Gold Fix <XAUFIX=> 1040.00 -4.50 -0.4 836.50 24.3
Silver Fix <XAGFIX=> 16.57 24.00 1.5 14.76 12.3
Platinum Fix <XPTFIX=> 1320.00 8.00 0.6 1529 -13.7
Palladium Fix <XPDFIX=> 324.00 3.00 0.9 365.0 -11.2
(Reporting by Frank Tang and Jan Harvey in London)
