Daily Gold Update

Source: Reuters

New York— U.S. gold futures closed fractionally lower on Tuesday, pressured by a rise in the dollar after U.S. data showed a leap in net capital inflows during January, dealers said.

Silver sagged with gold in choppy trading, but platinum and palladium climbed on chart-based buying after prices came down in the past week, traders said.

Gold for April delivery at the COMEX division of the New York Mercantile Exchange settled off 20 cents at $441.40 an ounce, after trading between $444.90 and $440.30.

Prices slipped on positioning in currency-dominated trade as the dollar rose after a report showed massive net inflows into U.S. assets in January that were more than enough to offset the wide trade deficit, said traders.

Gold had been holding near its 2005 highs previously, propped up by a weaker dollar over the past week.

"It is all a knee-jerk reaction to the euro and the net inflows," said a New York metals broker. "They (gold and the euro) both fell out of bed at the exact same time."

A stronger dollar makes dollar-denominated gold more expensive for non-U.S. investors.

Net capital inflows into U.S. assets were a stunning $91.5 billion, exceeding analysts rough forecasts of between $55 billion and $75 billion. The U.S. trade gap, which has weighed on the dollar recently, was $58.3 billion in January.

The euro was trading at $1.3315 at mid-afternoon, down from $1.3377 late on Monday.

However, gold was well supported technically at least, at the $440 area, dealers said.

April gold soared to a 16-1/2-year peak at $460.50 an ounce back on Dec. 2 on a weak dollar, and prices have been mostly firm since, excluding a brief drop to $410 early this year.

Spot gold priced at $440.25/1.00, compared with Monday's New York close at $440.75/1.50. London's Tuesday afternoon fix reached $440.65.

Merrill Lynch said gold may be enjoying a late winter rally sparked by seasonal factors like a rebound in demand from the March-May wedding period in India and producers' positive outlooks for the coming year.

But one fly in the ointment was the expectation of further U.S. interest rate hikes, which tends to weigh on the market, Merrill said in a precious metals report.

"We feel in the near term gold prices could reach $450 to $460, peaking with the end of the Indian wedding season. This will likely be followed by a sell-off during the summer doldrums period," it said.

Fundamentally, gold will draw support this year from a supply deficit of at least 200 tonnes in the market and from further weakness in the dollar, Merrill predicted in the report. It saw the euro hitting $1.38 in September.

Brokers and analysts put initial resistance in April gold futures at $449 and support at $441 to $438.

COMEX May silver fell 0.3 cent to $7.407 an ounce, after moving from $7.53 to $7.30. Spot silver inched to $7.36/39 from $7.35/38 previously. The fix was at $7.415.

April platinum rose $6.30 to end at $876.80 an ounce. Spot platinum was indicated at $873/878.

June palladium gained $1.95 to $202.95 an ounce. Spot palladium hit $200/205.