Daily Gold Update

Source: Reuters

New York— U.S. gold futures settled at their lowest level in three weeks on Wednesday, pressured by speculative selling after a slide in oil prices and following a higher dollar early in the day, traders said.

December delivery gold tumbled $8.80 or 1.9 percent to $465.80 an ounce on the New York Mercantile Exchange's COMEX division, after trading from $474.50 to $464, which marked its cheapest level since Sept. 27.

Gold prices recoiled as large fund-type accounts trimmed positions after they reached an overly long exposure on COMEX during the run-up to 18-year highs recently, dealers said.

"Right now, the market's volatile and it's all about the specs," said a trader at New York precious metals desk. He said the huge fund long exposure in gold remained largely in place, however, despite the day's pullback.

Another dealer said traders had an opportunity to take profits in gold due to a recently stronger dollar and after gold reached technical top above $475 early this week.

"I don't think people are ready to give up yet," the first trader said. "I think the weak longs are probably going to get out, and then gold's going to go up to test $500."

The yellow metal last flickered above that psychological price in December 1987.

Analysts and traders have been saying that growing concern about inflation and U.S. economic growth is likely to help gold rally above $500 in the near-term.

Broker ABN Amro expects gold prices to scale a fresh high next year due to inflation and stock market concerns and constraints in mine supplies.

ABN Amro raised its average price forecast for 2005 by $5 to $440 an ounce, and to $485 for the full calendar year of 2006. It also said $500/oz could be tested sometime next year.

Bullion hit an 18-year high at $480.25 on Oct. 12. On the same day, COMEX futures reached a similar peak at $483.10.

Final estimated COMEX volume hit 85,000 lots, compared with Tuesday's quieter turnover of 34,210 lots.

Open interest dropped 8,625 lots to 362,699 contracts as of Tuesday. Previously, interest had jumped sharply to about 371,000 lots.

Brokers viewed next technical support in December gold at $464 and the Sept. 27 low of $461.20, with resistance at $477.

In afternoon trading, the dollar was flat against the euro and oil was a touch lower, near $62 a barrel.

Spot gold traded down to $463.75/464.50 an ounce, vs. Tuesday's New York close at $471.10/1.90. Wednesday's afternoon fix in London by bullion dealers was at $465.90.

December silver tumbled 19.5 cents to $7.64 an ounce, after dealing from $7.835 to $7.61 — a 12-day low. Spot silver fell to $7.59/62 an ounce, from $7.76/79 previously. It fixed at $7.73.

NYMEX January platinum shed $5.40 to finish at $929.30 an ounce. Spot was worth $924/928.

December palladium lost $1.75 to end at $210.50 an ounce. Spot held at $205/209.