Daily Gold Update

Source: Reuters

New York— Gold futures settled firmer and above previous three-month lows on Wednesday, as the dollar dipped against the euro after U.S. durable goods orders data, making bullion cheaper for foreign investors, dealers said.

June delivery gold on the New York Mercantile Exchange's COMEX division rose $1.20 to $418.90 an ounce, after moving from $417.10 to $419.

Gold has had a close correlation with the euro/dollar for the last several years.

Against the euro, the dollar weakened as traders covered some short positions on the single currency after it failed to break lower. The durables data had only a fleeting effect on currencies, dealers said.

New orders for long-lasting manufactured items — from washing machines to aircraft — climbed 1.9 percent in April, but fell 0.2 percent minus the volatile transportation category, the government said.

Dealers said gold drew strength from firm industrial metals, which have received more fund interest as investors grew less worried about a sharp slowdown in U.S. economic growth.

"It's the industrial markets that are working a little bit better," said James Quinn, commodities commentator at A.G. Edwards. "So copper is doing better. Silver is following copper and gold tends to be the one that's lagging."

Switch activity stayed brisk as noncommercial players exchanged June positions for August before first notice day for June on Tuesday. With a U.S. market holiday on Monday for Memorial Day and a shortened session on Friday, that leaves two full sessions to complete the rollovers.

Just before the close, COMEX estimated final volume was 102,000 contracts, swollen by 24,195 switches.

Many traders refrained from too much outright trading before the long weekend, dealers said.

Spot gold was quoted at $418.60/9.30, up from the close at $417.40/8.10 an ounce. The afternoon fix in London was at $418.40.

Analysts peg strong support at $414-410 and say any reversion of the dollar to its weakening trend should put gold back on a solid footing.

July delivery silver gained 13.5 cents to close at $7.138 an ounce — its strongest close since last Thursday — after trading between $7.00 and $7.155.

A floor broker said the release early Wednesday of the World Silver Survey 2005 by research firm GFMS may have helped, but the market already looked strong, especially with speculation percolating about when a new silver-backed security may be launched.

"Every time it dips, it seems to be supported by the trade," he said. "But silver has been a lot stronger than gold."

GFMS said silver prices rose 36 percent to average $6.66 per ounce last year, boosted by less available supply and steady demand as well as a surge in investor interest.

Overall mine output rose, but government sales and scrap recovery declined, while fabrication demand held mainly steady despite the high price, GFMS said.

Spot silver last fetched $7.10/13 an ounce, versus $6.96/99 late Tuesday. Wednesday's fix in London was at $7.01.

In NYMEX metals, July platinum fell $4.50 to $865.30 an ounce. Spot platinum was at $864/867.

June palladium lost $3.15 to $185.25 an ounce. Spot was at $185.50/188.50.