Source: Myra P. Saefong, CBS.MarketWatch.com
San Francsico— Gold futures fell from a three-week high Tuesday to close lower, as news that two of Saddam Hussein's sons were killed in Iraq lifted the broader stock market and drove risk-averse investors away from the precious metal.
U.S. officials confirmed Tuesday afternoon that two men killed in a raid in Mosul are former Iraqi leader Saddam Hussein's sons Uday and Qusay. Reports of the deaths had emerged during the futures trading session.
Crude prices sank more than $1 and stocks rallied on the news, "leaving gold with little to do other than vacillate," said Erik Gebhard, president of Altavest Worldwide Trading in Laguna Hills, Calif.
Gold for August delivery shed $1 to close at $350 an ounce on the New York Mercantile Exchange. It climbed to a high at $352.90 earlier in the session, a level not seen since July 2. The futures contract climbed nearly $9 in the past four sessions.
"The market still has the capacity to move higher longer term, but it (spot gold prices) just rallied $12-plus in slightly less than a week," said John Person, head financial analyst at Infinity Brokerage Services.
That climb, along with a strong U.S. dollar Tuesday, made gold "somewhat ripe for retreat," said Gebhard.
Person said that for now, "the thinking amongst investors is that the economy is going to improve, but … improve with a vengeance in the fourth quarter."
If that happens, the Federal Reserve's "vigilant watch over deflation may have worked and could ignite signs of inflationary pressures, which are bullish for gold prices," he said.
After logging losses in the previous session, U.S. stocks closed higher on the confirmation of the deaths of Saddam's sons. The strength in the broader market lured investors away from the gold market.
Meanwhile, the dollar gained ground, strengthening against the euro, yen and Canadian dollar, also pressuring prices for the precious metal.
With gold sometimes seen as an alternative currency to the dollar, foreign buyers must take currency rates into account when making decisions about whether to swap out of their local currencies to buy the dollar-denominated metal.
Silver prices higher
Elsewhere on Nymex, the September silver contract tacked on 4 cents to close at $4.78 an ounce, holding its gains despite gold's close lower.
Silver, which for the most part is an industrial metal, has seen prices rally by nearly 25 cents in since July 1, said Infinity's Person.
"This could signal an expected increase in demand from the manufacturing side of the economy," he said. "If that develops then we look for a contraction in the jobless rate and then the economy will be back on its feet."
September copper closed down 0.4 cent at 77.25 cents a pound after falling by more than 1 percent in the previous session.
On the supply end, gold inventories stood at 2.674 million troy ounces late Monday, down 1,447 troy ounces from the previous session. Silver inventories were up 517,785 at 108.1 million troy ounces.
Copper stocks fell by 630 short tons to 313,289 short tons.
Also on Nymex, October platinum closed at $687.90 an ounce, up $2.90 on the session, while September palladium closed at $165.95 an ounce, down $2.
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