PRECIOUS-Gold sinks 2.5 pct on new fears Fed may reduce stimulus
* St. Louis Fed president: tapering possible later in year
* Option-related sales, technicals accelerate losses
* Coming up: U.S. Chicago PMI, Dallas Fed manufacturing Mon.
(Adds analyst comment, weekly performance, update markets activity) NEW YORK, Sept 20 (Reuters) - Gold sank 2.5 percent on Friday as institutional investors sold aggressively after the Saint Louis Fed president said the U.S. central bank might move next month to reduce stimulus spending that has bolstered bullion for years. Silver tumbled 5 percent and platinum group metals fell more than 2 percent. Gold all but erased the 4.5 percent rise posted on Wednesday after the Fed said it would continue its massive bond buying program. That surprise decision triggered a buying binge that sent gold to its biggest one-day gain in over a year. Gold fell more than industrial commodities and equities, which also slid on Friday, after St. Louis Fed President James Bullard said the U.S. central bank could scale back its massive bond buying program at an October meeting if data points to a stronger economy. "The gold market had rallied substantially on tapering being taken off the table. Now Bullard's comments have injected some uncertainty near term, and that has prompted a wave of selling in the gold and the precious metals complex," said James Steel, chief precious metals analyst at HSBC. Spot gold fell 2.4 percent to $1,331.20 an ounce by 3:32 p.m. EDT (1932 GMT). For the week, gold is now around 0.5 percent higher after giving back most of Wednesday's 4.2 percent rise, its biggest daily gain since June 2012. U.S. Comex gold futures for December delivery settled down $36.80 an ounce at $1,332.50, with trading volume at about 10 percent above its 30-day average, preliminary Reuters data showed. Option-related selling accelerated gold's decline, said Comex gold options floor trader Jonathan Jossen, noting that many participants exercised put options after heavy buying of inexpensive puts following Wednesday's rally. Relatively thin volume during gold's rally this week also suggested that gains could be short lived, Jossen said. In addition, a two-percent drop of open interest in Comex gold futures on Wednesday showed the post-Fed rally was driven new money, analysts said. Gold prices fell faster after declining below a key technical support at $1,345 where the 50-day and 100-day moving averages were converging, analysts said.
FUND SELLING EYED Commodity hedge fund Clive Capital told investors it will close down, the latest commodity fund to call it a day. It blamed a lack of investment opportunities for its poor performance and outflows. Sean McGillivray, head of asset allocation at Oregon-based Great Pacific Wealth Management, said there were some "sell-the-rumor" type selling on Clive's news, as worries about panic selling by funds could further pressure gold. A gauge of investor interest, holdings in the world's largest gold exchange-traded fund, the SPDR Gold Trust, rose 0.88 tonnes, or 0.1 percent to 912 tonnes on Thursday. Among other precious metals, silver slid 5.3 percent to $21.82. Platinum was down 2.1 percent to $1,427.50 an ounce, while palladium dropped 2.5 percent to $713.97 an ounce.
3:32 PM EDT LAST/ NET PCT LOW HIGH CURRENT SETTLE CHNG CHNG VOL US Gold DEC 1332.50 -36.80 -2.7 1327.20 1368.40 175,307 US Silver DEC 21.927 -1.365 -5.9 21.755 23.180 54,911 US Plat OCT 1432.60 -40.40 -2.7 1427.80 1467.80 12,031 US Pall DEC 721.95 -16.25 -2.2 715.30 738.40 4,214 Gold 1331.20 -33.19 -2.4 1328.73 1368.01 Silver 21.820 -1.210 -5.3 21.750 23.130 Platinum 1427.50 -31.30 -2.1 1432.00 1464.50 Palladium 713.97 -18.53 -2.5 718.27 735.00 TOTAL MARKET VOLUME 30-D ATM VOLATILITY CURRENT 30D AVG 250D AVG CURRENT CHG US Gold 188,914 160,768 180,237 21.39 -2.46 US Silver 60,167 68,382 57,843 33.61 -4.59 US Platinum 15,958 11,525 12,362 20.64 0.00 US Palladium 4,456 6,906 5,886
(Additional reporting by Jan Harvey in London; Editing by Dale Hudson, Keiron Henderson and David Gregorio)