Gold Slammed Again

The metal drops, but gold mining stocks buck the trend.
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Bears maintained their control of the bullion market Wednesday as funds continued to bail.

Contracts for December delivery of bullion closed off $14.80 at $566.70 an ounce on the Comex division of the New York Mercantile Exchange. Exchange-traded funds that hold the metal fell in concert: The

streetTRACKS Gold Shares

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iShares Comex Gold Trust

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were each off more than 1.3%.

Gold-mining stocks did buck the trend, however; with


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Harmony Gold

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leading gainers, the Philadelphia Stock Exchange Gold and Silver Index rose 1.1%.

"Speculators are driving the price at the moment," notes Peter Spina, a technical analyst with The decline "is not a true reflection of the physical demand and more of a representation of hedge fund activity."

A modestly stronger dollar also helped keep pressure on the yellow metal, with the greenback buying 117.995 yen, up from 117.92 yen late Tuesday. It was also marginally higher against the euro, which was trading at $1.2699 vs. $1.2726. Bullion tends to move in the opposite direction to changes in the U.S. dollar.

On the supply side of the precious metals equation, final data from the European Central Bank indicate that it sold around 393 tons of gold in the year to Sept. 26. That is over 20% lower than the 500-ton allowance, and the news has some observers bullish.

"We are perhaps on the threshold of an era of more moderate net official sector selling," states a research brief from GFMS, a specialty commodities consulting firm. "Sales under the remainder of the agreement are unlikely to reach quota either on an annual basis or for the full five-year agreement period."

Others, however, remain bearish in the short term.

"The odds of another new low this week remains very high," writes Ben Mancha, an analyst at Chicago-based NS Futures.

Elsewhere in the commodities markets, the red metal took a tumble also, with Comex December copper shedding 7.7 cents to close at $3.2055 a pound.

"Base metals are likely to remain volatile this week because of week long Chinese national holidays," writes Joseph Capurso, an economist at Commonwealth Bank of Australia.

Shares of diversified miner


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lost 1.9%.