Gold Tumbles Nearly 3% Amid Fed Fears

Gold fell more than 2 percent on Friday, as talk that the Fed might reduce economic stimulus later this year and news of a hedge fund closing cut into gains bullion made this week after the Federal Reserve's surprise decision to maintain stimulus.

Silver tumbled 5 percent and platinum group metals also fell more than 2 percent.

Gold, industrial commodities and equities fell broadly after St. Louis Fed President James Bullard said the U.S. central bank could scale back its massive bond buying program at an October meeting if data points to a stronger economy.

Also pressuring gold were fears of forced liquidation by institutional investors after news commodity hedge fund Clive Capital will close after several years of poor performance and falling assets.

``There was some 'sell-the-rumor' type selling after the news,'' said Sean McGillivray, head of asset allocation at Oregon-based Great Pacific Wealth Management.

Spot gold fell 2.3 percent to $1,333.50 an ounce by 12:26 p.m. EDT (1626 GMT). U.S. Comex gold futures for December delivery were down $35.60 an ounce to $1,333.50.

Option-related selling accelerated gold's decline, traders said, noting that many participants exercised put options after heavy buying of inexpensive puts following Wednesday's rally.

Gold prices fell faster after declining below a key technical support at $1,345 where the 50-day and 100-day moving averages were converging.

Among other precious metals, silver slid 5 percent to $21.87. Platinum was down 2.1 percent to $1,427.49 an ounce, while palladium dropped 2.5 percent to $713.97 an ounce.