AUGUST 25, 2011, 10:08 A.M. ET.

PRECIOUS METALS: Comex Gold Tumbles For Third Day

By Tatyana Shumsky
Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--Gold prices fell for the third day as stronger equities and hopes of more monetary stimulus emboldened traders to seek riskier investments.

The most actively traded contract, for December delivery, was recently down $30.10, or 1.7%, at $1,727.20 a troy ounce on the Comex division of the New York Mercantile Exchange. The contract touched a low of $1,705.40 in overnight electronic trading, the lowest price in more than two weeks.

August-delivery gold touched a low of $1,707.50, a level not seen since Aug. 8, and was recently trading down $42.70, or 2.4%, at $1,711.40 a troy ounce.

Gold prices have slumped 11% peak to trough, putting them firmly in correction territory, as fears about a U.S. recession and the spread of Europe's sovereign-debt problems take a back seat to renewed risk appetite.

"A large part of the "fear premium" has now been taken out of the [gold] price," said Ross Norman, chief executive officer of gold-bullion dealer Sharps Pixley.

Investors have been willing to pay higher and higher prices for gold, which soared to a record $1,917.90 a troy ounce, as growing uncertainty about the global economy stirred demand for a sound store of value.

"Gold has been the only safe haven for a while there...[but] some trades are concerned that gold has been going parabolic, we've been going up since the middle of July with no meaningful pullback," said Rob Kurzatkowski, senior commodity analyst with optionsXpress.

The recent 10% correction in benchmark U.S. stock indexes has some investors searching for bargains and selling profitable gold positions to pay for stocks.

"There's a sense that maybe this equity selloff has been over done," while gold's ascent has been "too much, too fast," said Kurzatkowski.

A speech by Federal Reserve Chairman Ben Bernanke scheduled for Friday is further clouding the outlook for gold. Bernanke is due to address an economic symposium at Jackson Hole, Wyo., and many traders are hoping the Fed Chairman will hint at a third round of monetary stimulus.

Dashing these hopes could damp the outlook for stocks and renew concerns about a U.S. recession, which would boost demand for gold as a haven.

Yet, without such stimulus, inflation--another driver of gold demand--is unlikely to resurface.

"A lack of fresh easing signals by Bernanke on Friday could send gold down to $1,580," said Tom Pawlicki, precious-metals analyst with MF Global.

-By Tatyana Shumsky, Dow Jones Newswires; 212-416-3095;

tatyana.shumsky@dowjones.com

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