Daily Gold Update

Source: Reuters

New York— Gold futures in New York closed lower on Tuesday, pressured by broker selling and speculative long liquidation, as the dollar continued to provide direction to the market, dealers said.

After the release of economic data that supported the U.S. currency, December delivery gold on the New York Mercantile Exchange's COMEX division went down $3.70 or 0.8 percent to end at $450 an ounce.

The session range ran from $453.90 to $448.30, with prices touching the lowest level since Thursday. The pullback came a day after gold touched a nine-month high at $455.80 on speculative buying.

James Quinn, AG Edwards & Sons commodity commentator, said that selling by floor brokers and funds heated up in the morning, dragging prices below Monday's session low at $451.20 and triggering pre-placed stop-loss orders.

"It's all off the data this morning," Quinn said.

The dollar firmed Tuesday as a narrower-than-expected U.S. trade deficit exerted more influence on trading than softer-than-expected inflation.

U.S. producer prices surged 0.6 percent last month as energy costs soared, but underlying inflation held steady as food prices fell.

Separately, the U.S. trade deficit narrowed unexpectedly in July to $57.9 billion, from an upwardly revised $59.5 billion in June.

The euro slipped to $1.2269 by midafternoon, from $1.2278 late on Monday. A firmer greenback makes dollar-priced gold more expensive for holders of other currencies.

In gold, some players had seen risk of a sell-off by commodity funds whose huge long stance meant there was less buying power available to prop up prices.

But overall, gold was expected to continue to track the euro's performance against the dollar.

Goldman Sachs raised its fair value estimate for gold over the next 12 months due to updated forecasts for currencies and U.S. interest rates in the aftermath of Hurricane Katrina.

The broker lifted its price target on the benchmark precious metal to $463 per ounce from its current fair value estimate of $434 after it revised downward its near-term view on the dollar.

With Katrina fanning concerns over growth, Goldman Sachs also predicted a pause in the Fed's rate tightening cycle at the Sept. 20 FOMC meeting, although the Fed Funds rate was still expected to rise to 5.0 percent by mid-2006.

It said it saw the dollar falling to $1.25 against the euro over the next three months, versus its prior forecast of $1.15.

Traders said that if the funds decide to push gold higher, prices could rally toward last year's highs at $458.70 in COMEX futures and $456.75 in bullion.

Anything above those levels would take gold to its highest since June 1988.

Estimated COMEX volume was 72,000 lots, versus Monday's more subdued 35,736 lots. Open interest in the market rose 4,143 contracts to 321,552 lots as of Sept. 12.

Spot gold last was at $445.95/446.65, off from Monday's late quote in New York at $449.60/450.30. The afternoon fix in London was at $445.40.

In silver trading, December futures sank 5.5 cents to end at $7.005 an ounce, traded $7.085 to $6.91. Spot silver reached $6.91/94 from $7.04/7.06 previously. It fixed at $6.985.

On the board at NYMEX, October platinum fell $2.40 to close at $913.50 an ounce. Spot platinum was quoted at $907/910.

December palladium shed $1.25 to finish at $184. Spot was stuck at $182/186.