Gold falls for seventh day on funds liquidation

Futures set for biggest weekly percentage drop in more than 20 years - Oct. 17, 2008NEW YORK (MarketWatch) -- Gold futures fell Friday for a seventh straight session, with the benchmark contract heading for the biggest weekly loss in more than 20 years.

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Gold for December delivery slumped $26.40, or 3.3%, to $778.10 an ounce on the Comex division of the New York Mercantile Exchange. The contract has lost nearly $80 this week, or more than 9%, its biggest weekly percentage loss since at least 1984, according to FactSet Research.
"Funds who would like to keep their asset of last resort are "being forced to sell, and this is causing weakness in the paper gold market price," said Peter Spina, president of GoldSeek.com.
"There will be more victims of the fund collapse and more forced liquidations even if it requires you to sell your most desired assets such as precious metals," he said.
Gold in the SPDR Gold Trust, the largest gold exchange-traded fund, fell to 756.86 tons Thursday from Wednesday's 767.58 tons, according to the latest data from the fund. That's down 10.72 tons, or 1.4%.


Analysts had projected gold prices to rise as demand for the precious metal as a safe haven is expected to increase amid the financial turmoil, but gold has repeatedly defied their expectations and has lost more than $120 in seven sessions.
"Gold has continued to fall and not made expected gains as the process of massive deleveraging of the entire international financial system is resulting in unprecedented selling in nearly all markets including the huge commodity index funds," said Mark O'Byrne, executive director of Gold and Silver Investments.
Some analysts said that in the long term, the global rescue plans to inject liquidity into the market will stir inflation -- something that would be a bullish sign for gold prices as investors tend to buy the metal as a hedge against rising prices. In other metals action, December silver dropped 2.8% to $9.37 an ounce.

Copper for December delivery lost 1.2% to $2.0615 a pound. January platinum slid 2.1% to $872.40 an ounce, and December palladium fell 1.6% to $170.40 an ounce.