Daily Gold Update

Source: Reuters

New York— U.S. gold futures rebounded from two-week lows to finish higher on Wednesday, bolstered by trade buying and short covering in light volume.

Dealers were tracking moves in the dollar and crude oil as gold prices consolidated around $430 an ounce, following the Federal Reserve's interest rate increase yesterday.

Gold for June delivery on the New York Mercantile Exchange's COMEX division finished up $2.30 at $430 an ounce, after sticking to a range between $427.60 and $430.90.

Estimated volume was 40,000 contracts, below Tuesday's 56,407 lots.

"We've had some liquidation in the last few days and we had a large drop in open interest, so maybe the market's feeling a little reassured that some of the longs have exited," said Tom Boustead, a metals analyst at Refco.

Open interest fell 8,845 lots to 290,539 lots on Tuesday.

After the fund selling dried up, trade buying helped boost gold back to the pivotal $430 mark, market sources said.

"It's all a knee-jerk reaction to currencies," said a metals broker at a futures commission merchant.

But another trader said the rally in U.S. light crude, up 1.6 percent at $50.00 a barrel, helped gold due to its role as an inflation hedge.

Now, the markets were likely to wait for Friday's U.S. nonfarm payrolls data in the morning and later Commitments of Traders report on COMEX gold futures to see the scope of the latest noncommercial net long position.

Boustead believed June gold was caught within a trading range between support at $426.50 and resistance at $431.50.

Gold on Tuesday got rammed to its lowest close since April 15 at $427.70, but the move came before the Fed's decision to lift rates by a quarter percentage point to 3 percent, which was in-ling with forecasts.

But, the U.S. central bank sounded less hawkish than expected on further increases in its accompanying statement.

The dollar responded by gradually declining, and on Wednesday it hit a six-week low versus the yen amid persistent chatter that China will soon revalue its dollar-pegged yuan.

The euro was last at $1.2945, almost 1 cent higher from Tuesday.

Spot gold finally was quoted at $428.85/9.60 an ounce, well above Tuesday's closing level in New York at $426.45/7.20. The London afternoon fix was at $428.80.

COMEX July silver climbed 13.0 cents to $7.013 an ounce, near the top of a $6.865-$7.05 range.

Boustead said silver futures must regain the $7.03 mark in order for the market's near-term outlook to improve. On Monday, silver made its lowest close since Feb. 9 at $6.81.

Spot silver last was priced at $6.97/7.00, above its prior New York close at $6.83/86. Wednesday's fix was $6.895.

On the board at NYMEX, July platinum rose $5.60 to end at $875.50 an ounce. Spot platinum hit $872/876.

June palladium gained $2.65 to $194.35 an ounce. Spot palladium reached $192/195.