Daily Gold Update

Source:Marketwatch

San Francisco— Gold futures rose Wednesday but closed well below the day's peak, and silver prices retreated from their highest level in more than two months as the metals took their cue from platinum futures, which sank more than 5%.

Speculation about the possible launch of a platinum-based exchange-traded fund continued to evaporate after Barclays, the bank behind the silver ETF, said it has no such plan.

December gold futures rose 30 cents to close at $629 an ounce on the New York Mercantile Exchange. That was the contract's highest closing level since Nov. 10, but prices had traded as high as $635 earlier in the session.

December silver shed 4.5 cents to close at $13.04 an ounce, but not before touching a high of $13.25, a level it hasn't seen since Sept. 6.

Regular trading on the exchange will be closed on Thursday and Friday for the Thanksgiving holiday.

Meanwhile, platinum for January delivery closed down $65.10 at $1,154 an ounce, after earlier falling to a low of $1,145. On Tuesday, the contract closed with a loss of more than $15 as doubts about an ETF began to surface. Spot prices had vaulted to an all-time high above $1,400 early in the session as the speculation hit its peak.

"The rumors about the platinum ETF have sparked interest in the ultra precious metal, but no definitive proof of such an ETF is apparent," said Kevin Kerr, editor of Global Resources Trader, a newsletter published by MarketWatch, the publisher of this report.

"We have not filed for a platinum product and have no immediate plans to do so," Christine Hudacko, a spokeswoman for Barclays Global Investors said Tuesday.

While it's unclear how much investor interest a platinum ETF might attract, investors flocked to both gold and silver ETFs when they launched, "and why should platinum be much different?" Kerr asked.

Platinum supplies have been running at a deficit for the past eight years, while demand has hit a new record every year for at least the last 10 years. See Commodities Corner. Traders expect an ETF to exacerbate that situation as it would require the removal of physical platinum from the market to back up the instrument.

But Tim Murray, a general manager at metals consultancy Johnson Matthey attributes the "unprecedented [platinum] volatility over the last 3 days" to "a liquidity squeeze in Zurich."

"It appears that a few inexperienced and uneducated speculators wrote ill-advised call options and had to scramble to cover their exposure when the market began to rally," he said in an e-mailed comment.

"This volatility will last until at least the month-end, as the options in question are due to expire at that time," he said. "The fundamentals have not changed, but this does validate our view that any speculative interest in an illiquid and tightly-balanced market like platinum will lead to severe price volatility and possible short-term supply disruption."

Weakness in the dollar provided some support to gold Wednesday. The dollar tumbled to a three-month low against the euro and a three-week low against Japan's yen Wednesday, undermined by growing concern that economic growth in the U.S. will slow more than forecast.

Kerr is optimistic that, on an overall basis, metals are on a firmer footing. "The metals in general seem to be heading for another run at record prices as central banks and individual investors may be getting ready to dip their toes back in," he said.

Rounding out the action in the metals, platinum's sister metal palladium saw its December contract fall $2.35 to end at $326 an ounce. December copper closed down 0.45 cent at $3.111 a pound.

On the supply side, gold inventories were flat at 7.52 million troy ounces as of late Tuesday, according to data from the New York Mercantile Exchange.

Silver supplies were unchanged at 107.6 million troy ounces and copper supplies rose by 1,045 short tons to 28,968 short tons.

Benchmarks tracking metals-mining equities extended their overall strength from the previous session, but traded below Wednesday's peak levels.

The Philadelphia Gold and Silver Index traded at 138.11, up 0.3%. The CBOE Gold Index added 0.5% to trade at 146.04 and the Amex Gold Bugs Index rose to 331.17, up 0.4%.

The DJ Wilshire Nonferrous Metals Index was up 1.2% at 5,809.18. The DJ Wilshire Industrial Metals Index traded at 3,274.54, up 1.3% from the previous session while the DJ Wilshire General Mining Index rose 2.7% to 1,364.57.