Daily Gold Update

Source: Reuters

New York— U.S. gold futures erased early gains to finish lower on Monday, tracking a weaker euro and swings in crude after Hurricane Katrina disrupted oil and gas production in the Gulf of Mexico, dealers said.

December delivery gold settled at $441.40 an ounce, down 70 cents, on the New York Mercantile Exchange's COMEX division, after dealing from $441.10 to $445.30.

A flurry of safe-haven and hedge buying in gold touched off by the storm dried up by mid-afternoon as the dollar bounced after a weak start and as oil trimmed gains, traders said.

Initially, oil and gold jumped as Hurricane Katrina strengthened into one of the fiercest storms ever seen in the United States, threatening energy output near the Gulf Coast.

Katrina slammed into Louisiana and Mississippi on Monday as a Category 4 storm on the five-step Saffir-Simpson scale.

Volatile oil prices and upcoming economic data should dictate direction for gold for now, dealers said, although risk of a sharp sell-off remains in gold futures.

Possible long liquidation has been a concern for traders because of a record-high fund long position in COMEX gold.

"While scaled down physical demand is likely to provide a good cushion on dips, a battle royal is steadily building between the COMEX noncommercial and commercial players," said James Moore at TheBullionDesk.com in a daily note.

"Increasingly large long and short positions could soon force either side's hand with capitulation likely to generate plenty of price momentum."

The latest Commitments of Traders data issued by the Commodity Futures Trading Commission showed the net speculative long position in COMEX gold futures rose to 159,687 contracts as of Aug. 23, a new record high, compared with the previous record net long at 157,607 lots on Aug. 16.

Tim Evans, analyst at IFR Markets, pegged support in December gold futures at $440 and $438.40 and resistance at $446 and $452.10 and $455.30.

The dollar rose before a heavy slate of U.S. data this week including consumer confidence on Tuesday, preliminary second quarter GDP Wednesday and August nonfarm payrolls Friday. The euro was down at $1.2232 after gold's close.

U.S. crude oil futures stood about $1 a barrel higher at just above $67 in late trading, off from an earlier all-time peak at $70.80.

Gold, which is seen as a classic hedge against inflation, tends to benefit from higher oil prices.

Spot gold last fetched $436.70/437.50 an ounce, compared with Friday's late New York quote at $437.20/438.00.

With the London bullion market shut Monday for a bank holiday, gold trading was a bit quieter than usual. Estimated volume was 28,000 lots, down from Friday's 38,021 lots.

Open interest fell 5,268 to 324,802 lots as of Friday.

In NYMEX trade, October platinum rose $6.60 to end at $904.40 an ounce.

"Platinum could also benefit from booming oil prices, as platinum-based catalysts are used in petroleum refining industries, sources said.