Daily Gold Update

Source: Reuters

New York— NY gold futures ended lower on Tuesday after funds sold on dollar firmness and weak oil prices, with options expirations exacerbating volatility.

Many players are positioned on the bullish side since gold's advance to 18-year highs last week. Hedge funds and other investors still look poised to buy on dips, traders said, but warned that with open interest hitting a record last week, funds are losing room to keep buying.

December gold at the COMEX division of the New York Mercantile Exchange ended down $3.30 at $466.20 an ounce, trading in a wide $470.90 to $461.20 range.

Estimated volume was a brisk 85,000 contracts, compared to Monday's official 64,198.

Twice during the session, prices tumbled then bounced to cut losses, partly on position adjustments before COMEX October options expired at the end of the day, dealers said.

"I would think that you saw fund liquidation for the day. The funds are massively long — dangerous, dangerous, dangerous. And with the dollar continuing its strength, they have to be nervous."

The dollar rose, somewhat surprisingly, hitting gold midmorning after the Conference Board said its September U.S. consumer confidence index fell to 86.6 from August's 105.50 and the Commerce Department reported a sharper than expected 9.9 percent fall in U.S. single family home sales in August.

"If the numbers don't do too much to curb the dollar's latent enthusiasm, then I think we're looking to consolidate a little bit with gold, and silver to follow, said James Quinn, commodities commentator at A.G. Edwards.

Meanwhile, oil prices fell on Tuesday, as investors weighed the impact on oil production in the Gulf of Mexico from Hurricane Rita, which did less damage to rigs and refineries this weekend than many had feared. That helped take the shine off the yellow metal as a hedge against inflation.

Spot gold was last quoted at $462.10/2.80, off from $466.30/7.00 late Monday. Tuesday's afternoon fix in London was $464.10.

COMEX December silver went down 3.7 cents to $7.328 an ounce, after dealing from $7.40 to $7.24.

Spot silver was quoted at $7.25/28, down from $7.33/36 an ounce. It fixed Tuesday at $7.295.

NYMEX October platinum rose 50 cents to $918 an ounce. Spot platinum closed at $913/917.

December palladium was $2 higher at $199.75 an ounce. Spot palladium was indicated at $192/196.