* Gold breaks below $1,150 as U.S. shows fewer job losses
* Biggest one-day percentage loss since Dec. 1, 2008
* US gold below 14-day moving average; next support $1,135
(Recasts, adds comment, closing prices, market activity;
changes dateline, previously NEW YORK/LONDON)
By Frank Tang
NEW YORK, Dec 4 (Reuters) - Gold's record rally deflated on
Friday, as prices tumbled as much as 5 percent after a dollar
rally triggered by better than expected U.S. data sent
investors racing to cut positions.
Gold posted its biggest one-day percentage loss since Dec.
1, 2009, but remained up 33 percent year to date.
Dealers said bullion was due for a correction after
investment funds and individual investors piled into the metal,
favoring a hard asset amid concerns about the value of paper
currencies and potential inflation.
"We've had a big move in a short period of time and it was
clearly overbought. It was susceptible to a pullback. I don't
think this is a surprise," said Caesar Bryan, who manages the
$650 million New York-based GAMCO Gold Fund.
Spot gold <XAU=> fell as low as $1,147.25, a one-week
bottom. It was at $1,161.50 an ounce at 5:02 p.m. EST (2202
GMT), down from $1,207.10 late in New York on Thursday.
U.S. February gold <GCG0> settled down $48.80, or 4
percent, at $1,169.50 an ounce on the COMEX division of NYMEX.
Gold prices began spiraling downward after the Labor
Department reported that U.S. employers cut 11,000 jobs in
November, the smallest number of job losses since the start of
the recession in December 2007. []
That report, which suggested the job market could begin to
recover soon, sent the dollar rallying against the euro and
yen. []
"Gold has been hit quite badly after the dollar
strengthened on the non-farm payrolls data ... counter to what
you would normally expect," said Dan Smith, analyst at Standard
Chartered.
Bill O'Neil, partner at New Jersey-based LOGIC Advisors,
said that bullion investors sold heavily to cover margin calls
amid widening losses.
Wall Street also sharply cut initial gains as investors
fretted that the positive jobs data could prompt the Federal
Reserve to raise interest rates.
"There are a few reasons to believe that we are not all of
sudden heading for euphoric-type situation here," O'Neill
said.
Spot prices struck a record high at $1,226.10 an ounce on
Thursday amid expectations for persistent weakness in the
dollar and rising inflation in 2010.
CHART SUPPORT BROKEN
U.S. February gold futures broke below 14-day support level
at $1,171.40 an ounce and the key Nov. 30 support at $1,165.
The next level will be around $1,130.00 per ounce, Bryan said.
Some economists are suggesting the U.S. Federal Reserve may
be able to tighten monetary policy sooner than expected based
on positive economic data.
"The data point to a transition in the economy from a deep
recession to a modest recovery," said William Sullivan, chief
economist, JVB Financial Group in Florida.
"This will encourage the Fed to be more vocal about an exit
strategy from their highly accommodative posture."
A weekly report from Commodity Futures Trading Commission
released after the close on Friday showed that net long
noncommercial positions in gold fell 1 percent to 259,064 lots
in the week up to Dec. 1.
Elsewhere, metals consultancy GFMS said China will overtake
India as the world's largest gold consumer in 2009, with total
demand forecast at 432 tonnes. Indian demand has been pressured
this year by rising prices. []
Among other precious metals, silver <XAG=> was at $18.49 an
ounce against $18.80 late on Thursday in New York.
Platinum <XPT=> fell almost 3 percent to $1,439.50 an ounce
against $1,480.50, while palladium <XPD=> was at $371.00
against $380.50.
Close Change Pct 2008 YTD
Chg Close % Chg
US gold <GCG0> 1169.50 -48.8 -4.0 884.3 32.3
US silver <SIH0> 18.520 -0.608 -3.2 11.295 64.0
US platinum <PLF0> 1449.70 -44.00 -2.9 941.50 54.0
US palladium <PAH0> 379.30 -7.50 -1.9 188.70 101.0
Prices at 3:41 p.m. EST (2041 GMT)
Gold <XAU=> 1155.30 -51.80 -4.3 878.20 31.6
Silver <XAG=> 18.46 -0.34 -1.8 11.30 63.4
Platinum <XPT=> 1440.50 -40.00 -2.7 924.50 55.8
Palladium <XPD=> 371.00 -9.500 -2.5 184.50 101.1
Gold Fix <XAUFIX=> 1190.25 -13.00 -1.1 836.50 42.3
Silver Fix <XAGFIX=> 18.83 -28.00 -1.5 14.76 27.6
Platinum Fix <XPTFIX=> 1472.00 12.00 0.8 1529 -3.7
Palladium Fix<XPDFIX=> 378.00 4.00 1.0 365.0 3.6
(Additional reporting by Veronica Brown and Pratima Desai in
London; Editing by Alden Bentley and David Gregorio)
((frank.tang@thomsonreuters.com; +1 646 223 6126;
Reuters Messaging: frank.tang.reuters.com@reuters.net))
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