The surge in hope for a US rate cut next week, and the more confident tone it injected into markets late last week combined to knock gold lower.
Gold and silver fell for the fourth straight day on Friday as the US dollar strengthened on the expectations of a rate cut and action from the US Government to try and limit the damage to homeowners from the subprime crisis.
That not only sent gold lower, but oil as well.
February Comex gold fell $US13.20 to $US789.10 an ounce on Friday: the metal dropped 4.3% over the week and ended the month of November down 0.8%, the first monthly decline since June.
March silver fell 28 cents to $US14.165 an ounce.
US traders say the price may sink lower in coming weeks if it falls this week under Friday's close.
But they reckon gold will bounce once the Fed cuts on December 11, as it has done with the cuts in September and October, as the US dollar has fallen.
Meanwhile gold production in Australia, the world's third-largest producer, was little changed in the third quarter amid record-high prices for the precious metal, consultants, Surbiton Associates said yesterday.
The firm (http://www.surbiton.com.au/) said the Australian industry produced 61.7 tonnes tons, or 2 million ounces, of gold in the September quarter.
That was down from the 63 tonnes produced in the previous quarter.
Newcrest's Telfer mine in Western Australia was the top Australian producer in the quarter with 159,634 ounces, followed by the Kalgoorlie Super Pit, a venture involving Newmont and the world's largest gold miner Barrick Gold, also in WA.
Gold output for the first nine months of 2007 was 184.5 tonnes compared to 192.8 tonnes in South Africa and 191.5 tonnes in China
Surbiton Associates forecast that China may overtake South Africa by the end of this year to become the world's largest gold producer.
Meanwhile Goldman Sachs UK chief economist, Jim O'Neill reckons gold could be under pressure next year as the financial pressures from the subprime mess and credit crunch subside.
He said the price of the metal may fall 15%-20% in 2008 because the easing on the volatility will help the US dollar steady and turn.
And there's also concern that demand for gold may weaken because the current high level of gold prices could undermine the jewellery sector next year.
Jewellers accounted for about 67% of gold purchases in 2006, according to the World Gold Council.
Swiss bank, UBS forecast Friday that expects gold to fall to $US750 within a month.
But gold is still heading for its second up year in a row.
Silver is up 9.5% this year and gold is 24% higher.
