* Gold caught in cross-asset liquidation as dollar rises
* CME hikes gold margins for first time since April
* Soros cuts gold holdings, but cites perfect conditions
* Investors ratchet back QE2 expectations, assets slide
* Coming up: U.S. October CPI Wednesday
(Recasts, updates with comments, closing prices, graphic,
changes byline/dateline, previously LONDON)
By Frank Tang
NEW YORK, Nov 16 (Reuters) - Gold prices fell more than 2
percent on Tuesday, notching their biggest three-day loss in
nearly a year, as deepening fears over Ireland's fiscal health
sent the dollar higher against the euro, triggering a second
round of broad liquidation across commodities.
While gold earlier this year benefited from safe-haven
flows in the euro zone crisis, it has been punished in sync
with other commodities lately by investors' need to liquidate
positions amid increasing margin calls, a rising dollar and
fear of more aggressive tightening measures in China.
Speculative sentiment was also hurt by news that the CME
Group <CME.O>, which operates the COMEX futures exchange, had
raised gold margins by nearly 6 percent, the first increase
since April. Margins on silver, which were hiked 30 percent a
week ago, rose a further 11.5 percent.[]
"There is across-the-board, margin-call type liquidation
going on. Investors hit by margin calls know that they can
always get liquidity from the gold market to raise capital,"
said Dennis Gartman, publisher of the investment newsletter The
Gartman Letter.
Spot gold <XAU=> fell 1.6 percent to $1,338.50 an ounce at
2:55 p.m. EST (1955 GMT), having earlier set a two-week low at
$1,329.45. Bullion has showed a cumulative loss of more than 5
percent in the past three sessions, its biggest decline since
early December.
U.S. December gold futures <GCZ0> settled down $30.10 at
$1,338.40 an ounce in heavy trade, with preliminary Reuters
data showing futures volume above 300,000 lots, 70 percent
above the 250-day moving average.
Earlier in the session, the December contract fell as low
as $1,329 an ounce, but prices bounced off key technical
support at $1,330, the contract's 50-day moving average .
Ireland came under intense pressure on Tuesday to request
aid over its debt crunch, and a news report said European
officials were weighing a rescue package of 80 billion to 100
billion euros for the country and a separate, smaller bailout
for its hard-pressed banking sector. []
The euro fell to a seven-week low against the dollar on
Tuesday amid heightened worries about a deepening euro zone
debt crisis, with losses accelerating after prices broke key
support levels. []
Tuesday's broad sell-off -- the Reuters-Jefferies index
fell by more than 3 percent for only the second time in the
past 18 months -- recalled the rout on Friday, when precious
metals were caught up in near indiscriminate selling.
Spot silver <XAG=> held up better than other metals,
falling only 0.2 percent to $25.38 an ounce, after enduring a
much sharper correction last week, with prices having collapsed
as much as 15 percent since margins were first raised last
Tuesday.
Gold, which is still up more than 20 percent this year, has
fallen 6 percent from a record $1,424.10 one week ago in the
broad sell-off that has knocked copper, crude oil and grains,
which have in turn suffered from mounting expectations for more
monetary tightening in top raw materials consumer China.
Some investors also ratcheted back their expectations of
the Federal Reserve's bond-buyback program, or quantitative
easing, to stimulate the economy, after a group of Republican
economists and executives called on the Fed to drop its plan to
buy $600 billion more in Treasury bonds, Gartman said.
[]
"It looks like people start to question the Fed's monetary
policy. It is now questionable whether it will keep QE2 that
was already announced," said Shanquan Li, portfolio manager of
the Oppenheimer Gold and Special Minerals Fund with total
assets of $4.4 billion.
St. Louis Fed President James Bullard reiterated on Tuesday
that the Fed would scale down its program only if there were
"hard data" showing a strong improvement in the economy.
FUNDS COOL TO GOLD
Coupled with flows out of hard assets was a cooling towards
bullion from some of the world's best-known gold bulls.
(Graphic: http://r.reuters.com/geg75q )
(Table of funds' position changes: [])
The most recent quarterly securities filings showed George
Soros cut his exposure to gold in the last quarter, along with
Eric Mindich. []
Billionaire investor Soros may be cutting back on his gold
bets, but he says the precious metal still has some kick to it,
as long as conditions like low interest rates prevail.
"The conditions for gold are pretty perfect," he said
during a speech in Toronto. "The big negative is that too many
people know this and a lot of hedge funds are very exposed ...
Gold has a tendency to go parabolic," he added, noting its
tendency to fall as quickly as it rises. []
Platinum and palladium were both down sharply, ignoring a
bullish outlook for the market next year from refiner Johnson
Matthey, which said improving supply and demand fundamentals
should bring both markets broadly into balance next year.
[]
(Reuters Insider: http://link.reuters.com/zeg94q )
Platinum <XPT=> fell 2 percent to $1,636.49 an ounce.
Palladium was down 4.5 percent at $639.47, in its third
successive daily decline.
Prices at 2:54 p.m. EST (1954 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCZ0> 1338.40 -30.10 -2.2% 22.1%
US silver <SIZ0> 25.233 -0.859 0.0% 49.8%
US platinum <PLF1> 1645.70 -40.10 -2.4% 11.9%
US palladium <PAZ0> 645.90 -35.40 -5.2% 58.0%
Gold <XAU=> 1338.70 -21.39 -1.6% 22.1%
Silver <XAG=> 25.45 0.03 0.1% 51.1%
Platinum <XPT=> 1639.00 -29.74 -1.8% 11.8%
Palladium <XPD=> 639.97 -29.25 -4.4% 57.8%
Gold Fix <XAUFIX=> 1349.00 -14.25 -1.0% 22.2%
Silver Fix <XAGFIX=> 25.48 -53.00 -2.0% 50.0%
Platinum Fix <XPTFIX=> 1658.00 12.00 0.7% 13.1%
Palladium Fix <XPDFIX=> 661.00 12.00 1.8% 64.4%
(Additional reporting by Amanda Cooper in London; Editing by
Walter Bagley)
