Daily Gold Update

Source: Reuters

New York— U.S. gold futures finished lower Monday on speculative selling and after a bit of producer selling at quarter-end, but keen fund interest and expectations of higher prices still supported the market, dealers said.

Benchmark December delivery gold at the COMEX division of the New York Mercantile Exchange sank $3 to end at $469.30 an ounce, after trading between $472.20 and $467.20.

Profit taking and long liquidation weighed on futures as funds became technically overbought last week and as oil prices eased Monday, but gold still held close to its recent near-18-year peak on economic and geopolitical worries, traders and analysts said.

Dealers saw some safe-haven interest in gold after three bombs on Saturday ripped through restaurants packed with evening diners on the holiday island of Bali, killing up to 27 people and wounding 125.

Market sources said buying of physical gold also was steady and interest was due to pick up in top consumer India amid the festival season that peaks in November. Demand in the Middle East also was reportedly strong, they said.

"Gold has been resilient. Traders have turned to buying on dips," a dealer at a precious metals desk said. "There is some supply coming into the market (from producers at quarter-end), but not anything major."

New money has poured into the market and open interest is near a record. New gold-backed investment products, most prominently exchange-traded funds like streetTRACKS and IShares COMEX Gold Trust, also have attracted new investors to gold.

Gold sources have said the yellow metal is expected to rise toward $500, until the specter of inflation goes away.

December futures on Monday still were within sight of the Sept. 22 high of $479 — gold's strongest since January 1988.

Merrill Lynch said, however, that gold might fall this month on seasonally based selling after a roughly 8 percent rise in bullion since June 30.

"If history is any indication, we would expect a modest decline for both bullion and equities (in the XAU Gold/Silver Index) in October," the investment bank said in a note.

In seven of the past eight years, bullion and gold equities have declined by an average of 7.5 percent and 16.7 percent from late September/early October until late October/November, Merrill Lynch said.

The investment fund long position in COMEX gold futures hit a record high last week, according to Commitments of Traders data from the Commodity Futures Trading Commission on Friday.

The noncommercial net long position rose to 166,100 contracts as of Sept. 27, from 158,126 lots a week earlier.

Traders said they now were awaiting U.S. nonfarm payrolls data for September on Friday for a sign of the economy's health after the hurricanes.

Spot gold last traded at $465.80/466.50 an ounce, below Friday's New York close at $468.80/9.50. Bullion dealers fixed gold at $466.10 in London in the afternoon.

Silver also pulled back from Friday's 14-week high on trader profit-taking, while platinum and palladium fell too.

December silver settled off 5.7 cents at $7.455 an ounce, trading from $7.51 to $7.40. Spot silver fetched $7.37/7.40, from $7.44/47 previously. It fixed at $7.375.

October platinum lost $7.50 to end at $927.80 an ounce. Spot platinum fetched $924/928.

December palladium slipped $2.65 to close at $197.15 an ounce. Spot palladium hit $192/195.