See below - the mood today is to move out of gold and into cash. As noted before, this is being done by the big players (funds) so that drags us little guys down as well. All we can do is wait for the tide to change, IMO.

Bullion sinks as investors opt for cash

FRANK TANG AND JAN HARVEY

Reuters

October 16, 2008 at 5:41 PM EDT

NW YORK, LONDON — Bullion prices sank on Thursday to one-month lows below $800 (US.) as commodity funds and investors dumped liquid assets and opted for cash amid heightened uncertainty in global markets.

Silver and platinum group metals also plunged to multiyear lows, extending sharp losses as investors sold economically sensitive metals on fears that demand would plunge if the U.S. economy fell into recession.

The broad selloff in commodities also saw declines in crude oil, copper, aluminum, cocoa and grains. Broad-based commodity index Reuters/Jefferies CRB dropped 2.5 per cent.

Spot gold fell to a session low of $786.80 an ounce, before bouncing back to $801.10 an ounce at midafternoon, down 5.6 per cent from Wednesday's nominal close of $848.

The U.S. gold futures contract for December delivery settled down $34.50, or 4.1 per cent, at $804.500 an ounce on the Comex division of the New York Mercantile Exchange.

“Hedge funds, the speculative type of players, and the investment community are struggling for cash. Liquidity and the credit markets are still very tight, and all they are doing is selling their liquid assets,” said James Moore, analyst at TheBullionDesk.com.

There was talk among traders on Thursday that the Swiss National Bank might sell gold to help fund the troubled Swiss financial firm UBS AG.

The Swiss National Bank was the biggest seller within Europe's Central Bank Gold Agreement in the fourth year of the current pact, selling 137 tonnes of gold.

Jonathan Jossen, Comex gold options floor trader, said that a big commodity fund was selling all commodities including gold in exchange for cash.

“You have commodity funds that are selling all around ... and that was exaggerated as there are not too many traders today,” Mr. Jossen said.

The U.S. stock market recovered from initial losses to trade slightly higher, seesawing in a volatile session.

Losses on other markets and relative strength in the U.S. dollar pressured gold.

“What we're seeing in the overall global economy is deflationary,” said Tom Hartmann, a trader at Altavest.

“Commodity prices are going down, and the dollar's rallying. Gold doesn't do very well in a deflationary environment.”

A stronger dollar typically weighs on gold, which is often bought as an alternative investment to the U.S. currency. Weaker oil prices, which tumbled nearly $5, are also undermining gold's appeal as an inflation hedge.

The market is now awaiting fresh moves from governments and central banks to address the credit crisis.

Traders say they expect more rate cuts from the U.S. Federal Reserve. While in the long term any economic stimulation is likely to pressure gold, analysts say in the short run it would boost the appeal of non-interest-bearing assets like bullion.

Among other precious metals, platinum plummeted and palladium slipped as investors feared a recession could cut demand for the metals which are primarily used in automotive catalytic converters.

Rhodium, which has similar applications, has plummeted more than 40 per cent since Tuesday and slipped 20 per cent on Thursday to trade at $1,850 an ounce against $2,450 on Wednesday.

“All the big firms are getting out of commodities right now. They are getting out of the platinum and palladium positions and just looking for cash,” said Adam Rabinowitz at RJ Futures in New York.

Spot platinum slipped nearly 9 per cent to $872 an ounce from $955 late in New York on Wednesday, while palladium fell nearly 11 per cent before recovering to $168.50 from $189 on Wednesday.

Silver reached a low of $9.30 an ounce before recovering to $9.62, down 7 per cent from Wednesday's nominal close of $10.23.