Daily Gold Update

Source: Reuters

New York— COMEX gold futures softened on Monday, pressured by a timid rise in the dollar, but players saw the market as still pinned in a broad trading range encompassing the $400 an ounce level, dealers said.

August gold fell $1.00 to finish at $405.80 an ounce, after moving in a session band between $408.40 and $404.80. Final estimated COMEX gold volume was a subdued 38,000 contracts.

The market was fixated on the dollars moves and the speed and magnitude of U.S. interest rate increases, leading to muted trade before U.S. Federal Reserve Chairman Alan Greenspans testimony to Congress on Tuesday and Wednesday, said Leonard Kaplan, president of Prospector Asset Management.

"Its basically dollar-related. I see gold as being in a trading range of $390 to $410, and because were at the high of the trading range, I look for lower prices but not significantly," Kaplan added. "While gold is a good sell at $406, its probably a good buy at $392," he said.

The greenback rose against the euro as traders took profits on some currencies that advanced last week after lackluster U.S. economic data dampened expectations of more aggressive interest rate hikes. The Fed has heretofore said it plans to take a "measured" approach to tightening credit.

The euro was last at $1.2425, off a higher $1.2461 quote earlier. A stronger greenback typically dents demand for gold as it makes the dollar-priced metal costlier for traders holding foreign currencies.

According to a Reuters poll released Monday, gold prices are expected to hold above $400 an ounce for the foreseeable future as the dollar stays soft and world security worries keep large investors hedging their bets on where money is safest.

The global survey of 24 analysts pointed to an average price of $404.50 a troy ounce this year, up 11.2 percent on 2003. Gains were seen being trimmed next year, to an average price of $402.50, up 10.6 percent on the 2003 average of $363.83.

Silver was pegged to average $6.31 this year, while platinum should average $834 and palladium $240, the poll said.

Meanwhile, weekly CFTC Commitments of Traders data showed the net fund long exposure in COMEX gold futures rose to 70,434 lots as of July 13, from 31,409 lots on July 6.

Analyst Tim Evans at IFR Markets said that was the largest weekly influx of longs since March 23 and the biggest bullish exposure since April 20. But he added that, while the inflow was supportive, recent price gains were not particularly impressive.

"Dollar weakness or no, it looks like the fund buying is being absorbed by fairly confident commercial selling," Evans wrote in a weekly report.

He traced resistance in COMEX August gold to $409.60, the peak from July 8, followed by $416.30 and the 15-year high from April at $433, with support at $400-399 and $389.

Spot gold last fetched $405.70/6.20 an ounce, compared to Fridays close in New York at $406.20/6.70. Mondays afternoon fix in London was at $406.35 an ounce.

September silver dropped 12.5 cents to end at $6.60 an ounce, after trading from $6.78 to $6.565. Spot silver was worth $6.60/62 at the closing bell, from $6.68/71 late Friday. Mondays London silver fix was at $6.705.

NYMEX October platinum rose $3 to settle at $824 an ounce. Spot platinum was last indicated at $826.00/831.00 an ounce.

September palladium shed $2.55 to $227 an ounce. Spot palladium was flat at $224.50/230.50 an ounce.