Daily Gold Update

Source: Reuters

New York— COMEX gold ended up on short covering Friday, decoupling from a drooping euro on relief after early selling failed to push futures below the 200-day moving average, considered make-or-break trend support.

"All the long-term funds sold it on the opening, then the trade bought it all the way up," said Leonard Kaplan, president of Prospector Asset Management. "I look at these prices as being cheap."

August gold GCQ3 closed up 50 cents at $345.10 an ounce.

It traded from $345.70 to $342.30, finding support for the second day at the 200-day average, which chart watchers consider a long-term trend indicator, after setting a 2-month low there Thursday.

As on Thursday, some funds were caught short trying to sell near the lows. Dealers sensed a reluctance to hold shorts into the weekend, especially with liquidity drying up for summer.

Many funds on COMEX have been overbought since the euro's record-setting rally against the dollar lifted gold to $375.80 in late May. But dealers said a 5,038 increase in gold open interest Thursday, when gold fell then closed up 70 cents, showed some speculators were building bearish positions.

"Pretty much everybody believes the fund selling was fund reversing and adding on to the shorts," said a floor broker, explaining that this was an invitation to put a squeeze on.

The euro was trading in the afternoon at $1.1306/08, down from $1.1379/85 late Thursday. It neared Tuesday's 2-month low at $1.1253 overnight, pressuring gold.

A weaker euro can keep European gold buyers on the sidelines until a fall in the dollar makes gold cheap for them again.

Gold also shook off 87-point rally in the Dow Jones industrial stock average, as investors waded back into blue chips after several days of selling.

The Labor Department's June Producer Price Index rose 0.5 percent, more than the 0.2 percent rise expected and perhaps a big enough whiff of inflation to help gold's tone.

Though it suggests fears of deflation and prolonged economic malaise are a tad overblown, the core PPI, minus food and energy prices, was still off 0.1 percent last month.

Spot gold XAU= closed at $344.90/5.40, up from $344.50/5.00 late Thursday. London bullion dealers fixed the afternoon spot reference price at $343.70.

September silver 0#SI: closed off 1.0 cent at $4.805 an ounce, trading from $4.845 to $4.765 after hitting an 8-week high at $4.895 Thursday.

Spot silver XAG= was last at $4.78/80, off from $4.81/83. It fixed at $4.755.

Funds have chased silver through several technical levels this week. As a quasi industrial metal silver was participating in a base metals rally amid mounting hopes for demand.

Friday looked like a repeat of Thursday. Funds took profits after selling gold and buying silver, expecting that the price ratio between the two would get smaller.

NYMEX October platinum 0#PL: rose $4.60 to $675.20 an ounce. Spot XPT= fetched $677.00/682.00.

September palladium 0#PA: eased 25 cents to $175.75. Spot palladium XPD= was last at $171.50/177.50.