Source:Marketwatch
San Francisco— Gold futures fell Tuesday to close back under $640-an-ounce with metals traders playing off action in the foreign-exchange market while digesting comments made by Federal Reserve Chairman Ben Bernanke on the U.S. economy and interest rates.
Peter Grandich, editor of the Grandich Letter, considers gold's decline "a pause that refreshes," and he said he's confident the metal "should resume its rise above key resistance of $640 to $645 no later than next week."
The dollar pared losses in recent dealings, a partial recovery after touching a fresh 20-month low against the euro.
The currency market appeared unfazed after Bernanke said the nation's economy is still on track to expand at a moderate pace over the next year without slowing too much. Inflation has been "better behaved of late" and should continue to slow gradually, he said.
"Bernanke or no Bernanke, the news brew today still contains: plunge in durable goods, plunge in consumer confidence, and home sales that are up for only one reason — a record plunge in median values," said Jon Nadler, an investment-products analyst at bullion dealers Kitco.com.
Against this backdrop, gold for December delivery closed down $3.30 at $637.30 an ounce on the New York Mercantile Exchange, weakening after trading as high as $641.30 earlier.
For now, "gold appears fairly valued," said Nadler, noting that "there is still good support around $630 per ounce."
But "on the other side of the channel, bullion needs to jump beyond $650 to convince sidelined buyers that there may be no looking back," he said in an e-mailed note.
In Monday's action, the benchmark gold contract gained more than $11 an ounce as the dollar continued to lose ground against most major rivals. The greenback hit a 20-month low against the euro on Tuesday, after a government report showed demand for U.S.-made durable goods declined much more than forecast last month.
But the dollar, getting a helping hand from housing data, was last down 0.3% against the euro to stand at $1.3175. Sales of existing U.S. homes rose 0.5% to a seasonally adjusted annual rate of 6.24 million in October, the first increase since February, the National Association of Realtors reported.
Meanwhile, uncertainty about the strength of the economy caused U.S. consumer confidence to decline for a second straight month in November, the Conference Board said.
Betting on more dollar weakness
Overall, the "street is grasping at straws," said Ned Schmidt, editor of the Value View Gold Report. Housing sales in October were not as bad as expected and "that gave an excuse for a rally in paper and some selling in gold," he said.
Instead, gold investors should be buying on all price dips," Schmidt advised.
When most of New York was closed for nearly three days for the Thanksgiving holiday weekend, the "rest of the world" showed that it "clearly believes the dollar will fall further — a lot further," said Schmidt.
And "with negative trends in place for the U.S. dollar, gold should trade $675-$700 by Christmas," he said, adding that the market may well see a "new cycle high for gold in January."
Echoing this bullish view was James Moore, analyst at TheBullionDesk.com. Gold's "increasing correlation with the euro and return of investor money, as players begin to diversify away from the greenback, should see gold challenge $650 and eventually $685 before year-end," Moore said in a note to clients.
Gold has gained more than $30 an ounce since the beginning of November, its rally accelerating in the past week as the dollar weakened on concerns about a slowing U.S. economy.
Potentially flavoring the trading in gold, this week's economic calendar contains several other key pieces of U.S. data — on consumer spending, manufacturing and a second reading on third-quarter gross domestic product.
Also Tuesday, other metals closed on a mixed note. December silver futures rose 13 cents to end at $13.62 an ounce and January platinum rose $3.20 to close at $1,150.60 an ounce, but December palladium closed down $1.65 at $323.35 an ounce.
December copper lost 4.95 cents to close at $3.138 a pound. "Copper is screaming bearish as consumption in China is now falling and supplies rising elsewhere," newsletter editor Grandich said. "It's only a question of when it falls below $3 and accelerates to the downside."
On the supply side, gold inventories fell to 7.49 million troy ounces as of late Monday, down by 32,055 troy ounces, according to Nymex data. Silver supplies rose by 213,727 troy ounces to stand at 108.4 million by 32,055 troy ounces, and copper supplies increased 944 short tons to reach 29,784 short tons.
Benchmarks tracking metals-mining equities trended mainly lower, taking their cue from weakness in gold and copper.
The Philadelphia Gold and Silver Index stood at 141.90 and the CBOE Gold Index was at
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