Daily Gold Update

Source:elanie Lovatt, BridgeNews

New York— COMEX August gold futures were down $3.3 at $288.20 after falling to $287.50, their lowest level in six days. Gold succumbed to selling pressure after Friday's commitment of traders report showed that a large number of shorts had covered positions. Gold prices were also battered as the dollar firmed against the euro.

The Commodity Futures Trading Commission commitment of traders report showed that over the last two weeks, up to and including Tuesday, large speculators' gold short positions fell a massive 43,671 contracts, or 72%, to only 16,814 contracts. Over the same period, large speculative longs climbed 11,613 contracts, or 58%, to 31,474.

Given last week's rally in gold prices, which culminated in a 3 � month high of $296.50 per ounce Tuesday, the commitment report shows much of the rally was short covering. Short positions had been building up and had reached 60,485 contracts at the last commitments report, prompting fears that gold was vulnerable to a short-covering rally, said traders. Now that this is largely a done deal, traders are expecting gold to stay relatively quiet.

"The news from the commitments is that all the shorts have gotten out, which said the market's going to go lower," said Leonard Kaplan, president of Prospector Asset Management. However, he does not see an extended selloff and has recommended clients cover and go slightly long when August falls to $287.

Meanwhile, as the dollar recovered against the euro after its slip early Monday morning, it put pressure on gold. If it manages to gain further ground against the euro it could continue to push gold prices lower.

Meanwhile, silver followed gold to lower prices and July was down 5.5 cents at $5.03 per ounce at 1110 ET after slipping to $5.025, its lowest level in five days. However, its moves remain half-hearted, and it is staying firmly entrenched near the bottom of the $5.01-$5.15 per ounce range it has seen over the last week.