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Silver futures slip, Gold Declines as Rally to Record Encourages Investors (edit - suckers) to Sell

By Claudia Carpenter

Nov. 30 (Bloomberg) -- Gold fell, narrowing this month’s gains, on investor sales following a rally to a record.

Spot gold’s 14-day relative-strength index has topped 70 since Nov. 13, a sign that prices may drop. Holdings in 16 exchange-traded gold products tracked by Barclays Capital fell 0.3 metric ton on Nov. 27, the first decline since Nov. 20.

“It’s very small compared to drops in the past,” said Suki Cooper, a Barclays analyst in London. “This is just a little profit taking.”

Gold futures for February delivery dropped $1.70, or 0.1 percent, to $1,173.80 an ounce at 11:44 a.m. on the New York Mercantile Exchange’s Comex division, down from the all-time high of $1,196.80 on Nov. 27. Prices are up 13 percent this month, heading for the biggest monthly gain in a year.

In London, gold for immediate delivery fell $4.60, or 0.4 percent, to $1,173.03 an ounce.

Spot gold slid as much as 4.2 percent on Nov. 27 after Dubai World sought to delay some debt payments, rattling markets from Tokyo to New York. Some investors had to sell gold to cover potential margin calls related to equity declines, according to David Wilson, a Societe Generale SA analyst in London.

“We did see a lot of money leave the market” last week, said Manqoba Madinane, an analyst at Standard Bank Group Ltd. in Johannesburg. “Some of it is back, but not all of it. I think we have a situation where people are buying as soon as the metal moves lower.”

The Central Bank of the United Arab Emirates pledged to support the nation’s banks and the branches of international lenders in the Persian Gulf country. The dollar fell against the euro today after rising in the two previous sessions. Gold usually gains when the dollar weakens.

Flight to Safety

“If we do see more flight to safety to the U.S. dollar, then we could see commodity prices under some pressure,” said Toby Hassall, an analyst with CWA Global Markets in Sydney.

Gold, up 33 percent this year, is set for a ninth annual gain as central banks, pension funds and individual buyers purchase precious metals as a hedge against declines in the dollar and possible inflation. UBS AG recommended investors increase commodity allocations for 2010.

A drop in prices is an opportunity to buy, said Matt Zeman, a metals trader with LaSalle Futures Group Inc. in Chicago.

“Until we see some action with the dollar, the path of least resistance for gold continues to be higher,” Zeman said.

The dollar fell as much as 0.7 percent against a weighted basket of six major currencies today before erasing the decline.

Silver futures for March delivery slipped 0.5 cent to $18.33 an ounce in New York.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aVfLhcGIVX_s