* Gold falls with crude after latest Goldman warning
* Gold/oil correlation tightens, near strongest since Jan.
* Rallying U.S. Treasuries bond prices weigh on bullion
* Coming up: U.S. March retail sales Wednesday
(updates market activity)
By Frank Tang
NEW YORK, April 12 (Reuters) - Gold dropped 1 percent on
Tuesday for its biggest fall in a month, as a sharp drop in
crude oil on a bearish forecast from Goldman Sachs dragged the
metal further from record highs.
Rallying prices of U.S. government debt also took some
safe-haven bids away from gold, which fell for a second
straight day, after Japan raised the severity level of the
crisis at its quake-stricken nuclear plant. []
Bullion has risen 11 percent since late January as rallies
in oil and grains stoked inflation worries. After hitting
31-year highs on Monday, silver also fell but less than gold
despite the white metal's higher price volatility.
"That (Goldman report) has given enough reasons for
investors to trim their positions, in particular for those
markets that have gone parabolic. That's enough to cool
enthusiasm for commodities at the moment," said Mark Luschini,
chief investment strategist of broker-dealer Janney Montgomery
Scott with $53 billion of assets under management.
But he added: "I don't think this is the end of the
commodity bull market."
Spot gold <XAU=> dropped to $1,451.73 an ounce by 3:44 p.m.
EDT (1944 GMT), having earlier hit a one-week low of $1,443.49.
On Monday, gold hit a record at $1,476.21.
U.S. gold futures for June <GCM1> settled down $14.5 at
$1,453.60 an ounce, with trading volume rebounding after
slower-than-normal activity in the last several sessions.
SILVER OUTPERFORMING GOLD
U.S. silver trade was also heavy for a second straight day
to top 130,000 lots, preliminary Reuters data showed, one of
the busiest days of 2011.
Silver <XAG=> reversed earlier gains to trade down 0.5
percent at $39.96 an ounce, and was about 5 percent below
Monday's 31-year high at $41.93.
The spread between gold and silver -- showing the relative
strength between the two metals -- has nearly halved since last
August.
Luschini cited strong demand from retail investors and
silver exchange traded funds for the metal's outperforming
gold.
"It's a higher beta for silver, which outperforms on the
upside and tends to come back harder on the downside," said
Luschini, referring to a high correlation between the return
from silver to that of the commodities market.
BULLION FALLS AS GOLDMAN WARNS
Goldman Sachs <GS.N> called a near $20 fall in the price of
Brent crude <LCOc1> in the coming months, saying speculators
have pushed prices ahead of fundamentals. []
It was the second warning of a steep market reversal from
the firm, which has been a long-term commodity bull, in as many
days.
In December, Goldman forecast gold prices to peak near
$1,750 an ounce in 2012 on rising U.S. real interest rates,
even as the metal's rally is expected to continue in 2011 due
to loose monetary policies. []
Gold is used as a safe haven particularly in times of
financial and geopolitical uncertainty. It's rise to record
highs during Japan's crisis coincided with historic rallies in
many commodities, most of which fell on Tuesday as investors
shed riskier assets and opted for the U.S. Treasury bonds.
The correlation between gold and oil tightened to 0.7 on
Tuesday, approaching its strongest level in nearly three
months, as recent crude rallies have increased gold's
inflation-hedge appeal.
(Graphic: http://link.reuters.com/pyd98r)
Poor investor sentiment more than offset weakness in the
dollar, which fell to a 15-month low against the euro. []
Among platinum group metals, platinum <XPT=> lost 0.8
percent at $1,765.46 an ounce, while palladium <XPD=> fell 2.9
percent to $759.
Prices at 3:44 p.m. EDT (1944 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCM1> 1453.60 -14.50 -1.0% 2.3%
US silver <SIK1> 40.066 -0.546 0.0% 29.5%
US platinum <PLN1> 1774.30 -18.50 -1.0% -0.2%
US palladium <PAM1> 770.10 -18.15 -2.3% -4.1%
Gold <XAU=> 1451.73 -15.02 -1.0% 2.3%
Silver <XAG=> 39.96 -0.21 -0.5% 29.5%
Platinum <XPT=> 1765.46 -14.84 -0.8% -0.1%
Palladium <XPD=> 759.00 -22.35 -2.9% -5.1%
Gold Fix <XAUFIX=> 1450.50 -10.75 -0.7% 2.9%
Silver Fix <XAGFIX=> 40.44 -93.00 -2.2% 32.0%
Platinum Fix <XPTFIX=> 1785.00 5.00 0.3% 3.1%
Palladium Fix <XPDFIX=> 783.00 2.00 0.3% -1.0%
(Additional reporting by Amanda Cooper in London and Lewa
Pardomuan in Singapore; Editing by Alden Bentley)
