Gold on track for biggest weekly drop since early December 08, silver drops to 7-month low

(Reuters) – Gold slid to a 6-1/2 week low on Friday, setting the stage for its sharpest weekly drop since December 2008 as it tracked a heavy sell-off in the commodities complex, under pressure as traders sold bullion to cover losses in other assets.

At 1343 GMT, spot gold fell to $1,687.54 a troy ounce, having earlier hit a fresh session low at $1,680.89 — its lowest level since August 8.

Spot silver also fell sharply, dipping to its lowest level in nearly seven months at $32.33 an ounce as commodities came under heavy pressure on growth fears and slight rebound in the dollar from earlier falls.

A strengthening dollar puts pressure on commodities priced in the U.S. unit as it makes them more expensive for holders of other currencies.

Traders blamed gold’s fall on margin calls to cover losses in other assets such as equities and silver, and distress selling by investors who have grown increasingly uncomfortable with the turmoil on the credit market.

“At this point in time I don’t think one can say that the safe haven rationale for gold is off. It’s just that it has been going up so much that we needed a very deep correction,” said MKS Finance head of trading Afshin Nabavi

“We see support starting to build around the $1,670 level provided silver doesn’t break below $32.”

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