Daily Gold Update

Source: MarketWatch

San Francisco— Gold futures closed slightly lower Wednesday, marking a third losing session in a row, as weakness in the U.S. dollar and strength in crude-oil prices failed to propel the metal's price higher.

Gold for June delivery fell 30 cents at $687.40 an ounce on the New York Mercantile Exchange.

"Gold was unable to make a successful push past the $695-$700 resistance with central bank gold supplies aiding in keeping the price capped," said Peter Spina, an analyst at GoldSeek.com. "As such, traders booked profits and the price fell."

Prices can "be revived with the weak U.S. dollar, but for now it is struggling a bit trying to get a rally started as we sit below this defined resistance," said Spina, in e-mailed comments.

Overall, "to go long now for a trader is taking quite a risk, because it was this time last year that gold fell heavily," said Julian Phillips, an analyst at GoldForecaster.com.

"The pullback is a reflection of this uncertainty," he said in e-mailed comments. "It could turn in a heartbeat, if some news were to break now and push gold either way."

Looking ahead, "I have not discounted the ability for gold to leap past this resistance in the coming weeks," Spina said.

Gold futures closed Tuesday with a loss of $6.50, near their lowest level in two weeks as a hefty decline in oil eased inflation fears and dampened the market demand for the precious metal.

Jon Nadler, analyst at Kitco Bullion Dealers, said that Wednesday's decline in gold prices was linked to options expiration trades.

"Gold's temporary disconnect to the dollar at this juncture is becoming rather disconcerting to the bulls," Nadler said.

The euro traded within striking distance of a record high versus the dollar Wednesday, after a report showed German business confidence rose more than forecast this month, boosting expectations the interest-rate differential between the U.S. and euro zone will continue to narrow.

Crude futures strengthened to top $65 a barrel after the Energy Department reported an 11th-straight drop in motor gasoline supplies for the week ended April 20.

For gold, "there seems to be a great deal of concern on the lack of follow through from investors at present and is being used as the reason for the inability to vault past the $700 price level," said Neal Ryan, director of economic research at Blanchard & Co., in a morning note to clients.

"The huge influx of central bank gold into the market is the only thing keeping prices from visiting these levels and highlights that prices holding up in the face of these significant sales increases has been nothing short of remarkable," Ryan said.

Other metals prices were mixed. May silver fell 1.7 cents at $13.765 an ounce.

July platinum ended up $5.70 at $1,317.20 an ounce, June palladium rose $4.05 at $383.05 an ounce and May copper rose 3.35 cents at $3.5860 a pound.

Platinum prices will extend their rally this year and could rise as much as 11% to $1,450 an ounce, fueled by positive investor sentiment and strong fundamentals, precious metals consultancy GFMS said Wednesday.

The firm is expecting sister metal palladium to rise as high as $420 an ounce this year vs. the closing price of $379 on Tuesday.

On the supply side, gold warehouse stocks were unchanged at 7.68 million troy ounces as of late Tuesday, according to Nymex data. Silver supplies fell 1.8 million troy ounces to 129.4 million troy ounces, while copper supplies fell by 124 short tons to 34,940 short tons.

Among individual companies, Freeport-McMoRan Copper & Gold Inc.'s first-quarter profit shot up 89%, helped by the company's recent purchase of Phelps Dodge Corp. and by a surge in metals prices, financial results showed Wednesday.

In results colored by the Phelps Dodge acquisition, Freeport-McMoRan, a copper, gold and molybdenum mining company, said earnings swelled to $476.2 million, or $2.02 a share, from $251.7 million, or $1.23 a share, in the first three months of 2006.

Indexes tracking the performance of stocks in the metals and mining sector rose Wednesday. The Amex Gold Bugs Index rose 1% to 351.84 points, the CBOE Gold Index added 0.9% to 149.29 points and the Philadelphia Gold and Silver Index rose 1% to 142.42 points.

As for sector ETFs, the StreetTracks Gold Trust ETF rose 0.1% to $67.77, the iShares Silver Trust ETF fell 0.02% to $137.07 and the Market Vectors-Gold Miners ETF rose 1.1% to $41.