Gold Bulls `Running for Cover' Signal Price Drop: Chart of Day

By Millie Munshi

Aug. 20 (Bloomberg) -- Gold, down 21 percent from a record $1,033.90 an ounce in March, may be headed down after open interest in New York futures contracts for the precious metal plunged to the lowest level in 11 months.

The CHART OF THE DAY shows open interest, or the total number of contracts yet to be closed, liquidated or delivered. This reached 365,611 on Aug. 12, down 26 percent from a four- month high on July 18 and the lowest since Sept. 10. Open interest on the Comex division of the New York Mercantile Exchange reached 593,953 on Jan. 15 -- the highest since at least 1994 -- before gold rallied another 15 percent to a record on March 17.

``Open interest in gold is down sharply and it just shows you people are running for cover from this market right now,'' said Ron Goodis, the futures-trading director at Equidex Brokerage Group Inc. in Closter, New Jersey. ``No one wants to get into gold now.''

Gold plunged 8.4 percent last week, the biggest drop in 25 years. Gold for December closed yesterday at $816.80 an ounce.

Commercial users of the metal, including investors or mining companies, also have reduced their bets on price gains to the lowest since September. Net-long positions fell by 20 percent from a week earlier to 130,660 contracts on Aug. 15, the biggest drop and the lowest level since September.

``An outflow of passive and active investment money'' means ``it is hard to be positive about the out for precious metals over the next month or so,'' John Reade, the head of UB AG metals strategy in London, said in a report on Aug. 18.

To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net