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PRECIOUS-Gold eases from record high after CME margin hike

Published 08/11/2011, 02:42 AM
Updated 08/10/2011, 08:00 PM

* Spot gold record at $1,813.79; U.S. gold at all-time high $1,817.6

* CME Group raises margin on U.S. gold futures

* Spot gold to retrace $1,775/oz -technicals

* Coming up: U.S. weekly initial jobless claims; 1230 GMT (Updates prices)

By James Regan and Rujun Shen

SYDNEY/SINGAPORE, Aug 11 (Reuters) - Gold eased on Thursday from the session's record highs after the CME Group raised margins on COMEX gold futures, but turmoil in the global financial markets and fears of slower growth buoyed sentiment.

Spot gold hit an all-time high of $1,813.79, and U.S. gold rose to a record high of $1,817.6 early in the day.

Both eased after the CME Group raised margins on U.S. gold futures by 22.2 percent, driving spot gold down to $1,787.61 an ounce by 0624 GMT, off 0.4 percent from the previous close.

U.S. gold traded up 0.3 percent at $1,789.90.

"Historically when margins are raised significantly it tends to cause a bit of sell-off," said Darren Heathcote, head of trading at Investec Australia.

"We've seen some of it now, but it's difficult to see a great deal of selling, because we are in very, very volatile and uncertain times when markets are moving very violently. Gold has proven too much of an attraction as an alternative investment and the margins may not have as much influence."

On the relative strength index, spot gold fell to 82.7, suggesting a heavily overbought market, although the index was off its earlier level near 86, the highest since October 2010.

The rapid rise in prices has prompted concern of a price retracement.

"Gold is overbought and things are looking a little risky," said a physical dealer in Hong Kong, who felt gold could fall towards $1,750.

"But as the debt worries linger and the stock market is still on the downside, gold remains a safe haven."

Technical analysis suggested gold could fall to $1,775 an ounce, said Reuters market analyst Wang Tao.

Gold's safe-haven allure has attracted investors fleeing the risk of debt crisis contagion in Europe and slowing global growth. Prices of cash gold have risen as much as 21 percent since the end of June.

Stock market woes have helped push gold's ratio to the S&P-500 stock index to its highest since 1988. But that ratio remains far below its peaks of 1980 and the 1930s, and gold is still below its inflation-adjusted record near $2,500.

Extreme market turmoil is forcing central banks to shift policy. Central banks in Japan and Switzerland said they would rein in the appreciation of their currencies, while the U.S. Federal Reserve promised to keep rates near zero for at least two more years.

"With the authorities in both Japan and Switzerland announcing intentions to intervene to weaken their currencies, gold remains the last protection against the potential for widescale money printing as governments seek to recapitalise their banks and restimulate their economies," UBS said in a research note.

Precious metals prices 0624 GMT Metal Last Change Pct chg YTD pct chg Volume Spot Gold 1787.61 -6.89 -0.38 25.94 Spot Silver 38.88 -0.35 -0.89 25.99 Spot Platinum 1780.15 16.90 +0.96 0.72 Spot Palladium 733.97 9.94 +1.37 -8.20 TOCOM Gold 4405.00 81.00 +1.87 18.13 128069 TOCOM Platinum 4426.00 58.00 +1.33 -5.75 13757 TOCOM Silver 95.60 2.50 +2.69 18.02 735 TOCOM Palladium 1825.00 -30.00 -1.62 -12.97 460 COMEX GOLD DEC1 1789.90 5.60 +0.31 25.93 52863 COMEX SILVER SEP1 38.94 -0.39 -1.00 25.84 5343 Euro/Dollar 1.4239 Dollar/Yen 76.60 TOCOM prices in yen per gram. Spot prices in $ per ounce. COMEX gold and silver contracts show the most active months

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