NEW YORK, Jan 15 (Reuters) - COMEX gold fell 3.15 percent to a one-month low on Thursday, dragging down silver and mining stocks, as a firming dollar spooked speculators out of the long positions booked in gold's rise to 15-year highs last week.
Hedge funds and commodity trading advisors -- their more regulated cousins -- had been holding one of the largest-ever bullish bets and used the dollar's recovery as an excuse to take profits before too much of their windfall evaporated.
February gold closed down $13.30 at $408.70 an ounce in very heavy estimated turnover of 85,000 contracts. It hit $408.00, the cheapest since Dec. 17 and down from its high of $421.00.
"There is long liquidation. No featured names, no producers really. It just looked like fund-type of business," said a bullion dealer.
The profit-taking came a day before COMEX closes early Friday for a three-day weekend. Financial markets will be closed Monday in observance of Martin Luther King Jr.'s birthday.
Spot gold was last quoted at $408.75/9.50, down from the previous close at $421.40/2.15 and London's afternoon fix at $412.50.
The fall came as the euro's retreat below $1.26 made gold less attractive to European investors. Gold's drop accelerated when selling breached key support at $418 -- a technical breakout level in the rally to $431.50 on Jan. 6 -- and $410.
"As the perception emerged in the market that the dollar was not a one-way street, that a rally in the dollar was possible, a small movement upward in the dollar caused a significant downdraft in precious (metals)," said Leonard Kaplan, president of Prospector Asset Management.
At the New York Stock Exchange, shares of Newmont Mining Corp. were down 4.9 percent at $42.48 a share, while Freeport McMoRan Copper & Gold Inc. was 7 percent lower at $35.98.
Gold's move last week to the highest levels since 1988 came as the euro reached lifetime highs against the dollar. With worries about the U.S. occupation of Iraq and al Qaeda attacks, investors saw gold as a safe alternative to the greenback.
Overnight news that Germany's economy, the biggest in Europe, shrank 0.1 percent in 2003 -- the first annual drop in a decade -- and grew only marginally in the fourth quarter, underscored the perception that the surging euro is stifling euro-zone growth, dealers said, raising speculation that the European Central Bank will intervene or cut interest rates.
The euro fell to $1.2581/87 from $1.2643/46 late Wednesday.
Though analysts see a risk of further gold selling, they remain optimistic about prices. In a Reuters survey released Thursday, analysts forecast an average price of $419.50 for 2004, which would mark the third straight year of double digit gains since gold was languishing near 20-year lows in 2001.
Consulting firm GFMS Ltd. also released an update to its 2003 Gold Survey, predicting prices would average $437 an ounce in the first half of the year.
March silver fell 21.7 cents, 3.37 percent, to $6.213, moving from $6.43 to $6.19. Volume was a heavy 24,000 lots. Spot silver fell to $6.19/21 from $6.40/42. The fix was $6.315.
Silver rose to its highest in almost six years on Monday, hitting $6.795 just day's after breaking above $6.00 on the last trading day of 2003.
Silver was seen averaging $5.80 an ounce this year, according to the Reuters survey.
"It's still really overcooked," said Jim Pogoda, a precious metals vice president at Mitsubishi International Corp. "Does it deserve a $6 handle? I don't think so."
NYMEX April platinum fell $5.50 to $848.90. Spot last fetched $850.00/855.00.
March palladium dropped $5.55 to $215.65 an ounce. Spot closed at $209.00/214.00.