* Goldman's charge by the SEC sparks liquidation worries
* Paulson & Co's massive gold positions in focus
* Yuan eyed after talk of floating exchange-rate system
* Coming up: GFMS Platinum/Palladium report on Thursday
(Recasts, adds comments, closing prices, changes byline,
dateline, previously LONDON)
By Frank Tang
NEW YORK, April 16 (Reuters) - Gold dropped to a 10-day low
on Friday, losing 2 percent as investors cashed in long
positions after U.S. regulators charged investment bank Goldman
Sachs, a leading and commodities player, with fraud.
A wide range of financial markets from Wall Street stocks
to commodities sold off after the U.S. Securities and Exchange
Commission charged Goldman Sachs Group Inc <GS.N> with fraud
over its marketing of a debt product tied to subprime
mortgages. []
Many in the gold market voiced concern over the SEC's
allegation that Paulson & Co, a major hedge fund run by
billionaire John Paulson, worked with Goldman in creating a
collateralized debt obligation.
"Gold may be down because the market believes that Paulson
& Co may need to sell some of its gold position," said Joseph
Arsenio, managing director of California-based Arsenio Capital
Management.
Paulson, one of most notable gold investors, is the biggest
owner of SPDR Gold Trust <GLD>, holding 8.4 percent of the
world's biggest gold exchange traded fund. The company also
owns significant stakes in a number of gold mining companies.
"The market is reacting to Goldman's extensive trading
positions across all asset classes and the threat that those
markets will all be disrupted as an unintended consequence of
this investigation."
Spot gold <XAU=> was at $1,135.10 an ounce at 3:25 p.m. EDT
(1925 GMT), down from $1,157.95 late in New York on Thursday.
It was gold's biggest one-day drop since Feb. 4. The metal
ended the week more than 2 percent lower, snapping a two-week
winning streak.
U.S. June gold futures <GCM0> settled down $23.40, or 2
percent, at $1,136.90 an ounce on the COMEX division of the
NYMEX.
Safe-haven demand was absent in gold as the market fretted
over further selling related to Goldman and the prospect of
tighter financial regulations in metals and commodities,
traders said.
"Goldman is one of the biggest players in commodities, so
there is fear that there could be some forced liquidation of
positions," said Bill O'Neill, partner of New Jersey-based
LOGIC Advisors.
Traders said that the Goldman news prompted investors to
take profits on gold's rally since it stood at about $1,040 an
ounce in early February.
Wall Street stock indexes also fell as much as 2 percent as
the Goldman news sharply lowered risk appetite.
"The commodity markets have been closely correlated to
rising stock markets, so any derailment of that trend was going
to be slightly negative for commodities," said Robin Bhar, an
analyst at Credit Agricole.
CURRENCY FLUCTUATION WEIGHS
Analysts said bullion investors were also unnerved by
potential currency volatility, after China's President Hu
Jintao said the country remained on course to gradually put in
place a managed floating exchange rate system. []
Also knocking gold, the euro slid to a one-week low below
the key $1.35 level on Friday, driven by concerns about
debt-laden Greece and technical momentum after
stronger-than-expected U.S. housing starts data. []
[]
Among other precious metals, silver <XAG=> took the lead
from gold, and was last at $17.68 an ounce against $18.37.
Platinum group metals also retreated after recent sharp
gains. Platinum <XPT=> was at $1,688.50 an ounce against
$1,717.50, while palladium <XPD=> was at $528.50 against $542.
The market will be watching a platinum/palladium report due
Thursday by respected metals consultant GFMS Ltd.
Close Change Pct 2009 YTD
Chg Close % Chg
US gold <GCM0> 1136.90 -23.4 -2.0 1096.20 3.7
US silver <SIK0> 17.675 -0.758 -4.1 16.845 4.9
US platinum <PLN0> 1695.30 -31.00 -1.8 1471.00 15.2
US palladium <PAM0> 531.85 -14.05 -2.6 408.85 30.1
Prices at 3:29 p.m. EDT (1929 GMT)
Gold <XAU=> 1135.65 -22.30 -1.9 1096.35 3.6
Silver <XAG=> 17.68 -0.69 -3.8 16.84 5.0
Platinum <XPT=> 1688.50 -29.00 -1.7 1465.50 15.2
Palladium <XPD=> 529.00 -13.000 -2.4 405.50 30.5
Gold Fix <XAUFIX=> 1151.50 -5.50 -0.5 1104 4.3
Silver Fix <XAGFIX=> 18.35 8.00 0.4 16.99 8.0
Platinum Fix <XPTFIX=> 1708.00 12.00 0.7 1466 16.5
Palladium Fix<XPDFIX=> 532.00 10.00 1.8 402 32.3
(Additional reporting by Robert Gibbons in New York, Jan
Harvey and Rebekah Curtis in London; Editing by David
Gregorio)
