* Silver down 5 pct, fourth biggest 1-day loss this year
* Gold retreats from all-time high as rally peters out
* Europe debt crisis, U.S. money supply in focus
* Coming up: U.S. weekly jobless claims Thursday
(Recasts, updates comments and market activity, changes
dateline, previously NEW YORK/LONDON)
By Frank Tang
NEW YORK, Dec 7 (Reuters) - Silver fell 4 percent in heavy
trade on Tuesday, its fourth biggest one-day loss this year,
and gold dropped more than 1 percent, hit by a combination of
technical selling and rising short-term U.S. interest rates.
On Monday, silver rose above $30 an ounce and gold set a
record high in a safe-haven play on concern about debt in the
eurozone and speculation of more U.S. monetary easing after
comments by Federal Reserve Chairman Ben Bernanke.
"Obviously, the silver market was vulnerable to some type
of profit taking or technical correction due to that very
significant run in a very short period of time," said David
Meger, vice president and director of metals trading of Vision
Financial Markets in Chicago.
Meger cited strong technical resistance for silver at
$30.80 an ounce, and a sell-off in gold and metals after U.S.
benchmark Treasuries rates yields posting their biggest one-day
rise since June 2009 and their highest since June.
[]
Even after Tuesday's decline, silver remained up 70 percent
year to date, outperforming gold's 28 percent.
Spot gold <XAU=> dropped 1.6 percent to $1,400.95 an ounce
at 5:05 p.m. EST (2205 GMT), sharply below a record $1,430.95
set during the session. U.S. gold futures for February delivery
<GCG1> settled down $7.10 at $1,409.
Gold's retreat was in line with a pullback in other
commodities, with copper also easing back from record highs and
oil slipping from an earlier two-year high. [] []
Spot silver <XAG=> tumbled 5.1 percent to $28.62 an ounce,
having earlier hit fresh 30-year highs at $30.68 an ounce. U.S.
COMEX silver futures volume totaled almost 120,000 lots, one of
the most heavily traded day of this year.
Gold volume on the COMEX division of the New York
Mercantile Exchange was nearly 200,000 contracts, about 18
percent below its 30-day average, as some trading desks and
funds already have closed their books ahead of the year end.
"The market had really run out of momentum, and, although
we made new highs, it was more on sentiment than on fresh
business," said Simon Weeks, head of precious metals at the
Bank of Nova Scotia.
The precious metal is likely to remain supported by
concerns over the financial health of the euro zone.
Germany and other euro zone states resisted calls on Monday
from the International Monetary Fund to do more to quell the
bloc's debt crisis, although the euro firmed on optimism that
Ireland would pass an austerity budget. [] []
"Even though the euro is regaining a little bit of strength
against the dollar after the losses yesterday, it is still on
the weak side, and fears of contagion are lingering," said
Peter Fertig, a consultant at Quantitative Commodity Research.
He was referring to worry that debt problems would spread in
the euro zone.
DWINDLING LIQUIDITY
Federal Reserve Chairman Ben Bernanke signaled on Sunday
the U.S. central bank could expand its existing quantitative
easing program by buying more government bonds.
[]
With the U.S. dollar set to come under more pressure from
the prospect of rising money supply, gold should reap the
benefits of investors seeking an alternative to volatile
currencies, analysts said.
However, the end of the year traditionally brings with it
less liquidity and greater potential for rapid shifts in price
direction, meaning that gold could endure more setbacks before
resuming its uptrend.
"Tactical investors have turned positive on gold and silver
and increased their long exposure. In our view, positioning
does not look excessive, suggesting that the sector could
attract further near-term flows," Credit Suisse analysts said
in a note. "However, with markets closing in on critical price
levels, risks of investors' taking profits have increased as
well."
The number of ounces of silver needed to buy one ounce of
gold hit its lowest level since February 2007 at just 46.99,
having declined from a seven-month high this February at
70.91.
Platinum <XPT=> slipped 1.4 percent to $1,696 an ounce,
while palladium <XPD=> lost 2.2 percent to $738.97.
Prices at 5:13 p.m. EST (2213 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCG1> 1409.00 -7.10 -0.5% 28.5%
US silver <SIH1> 29.777 0.042 0.0% 76.8%
US platinum <PLF1> 1705.20 -8.40 -0.5% 15.9%
US palladium <PAH1> 738.70 -12.70 -1.7% 80.7%
Gold <XAU=> 1400.60 -0.26 0.0% 27.8%
Silver <XAG=> 28.62 -0.04 -0.1% 70.0%
Platinum <XPT=> 1686.99 -1.51 -0.1% 15.1%
Palladium <XPD=> 729.50 -0.47 -0.1% 79.9%
Gold Fix <XAUFIX=> 1420.00 -6.00 -0.4% 28.6%
Silver Fix <XAGFIX=> 30.50 90.00 3.0% 79.5%
Platinum Fix <XPTFIX=> 1724.00 3.00 0.2% 17.6%
Palladium Fix <XPDFIX=> 769.50 7.50 1.0% 91.4%
(Additional reporting by Amanda Cooper and Jan Harvey in
London; Editing by David Gregorio)
