Daily Gold Update

Source: Reuters

New York— COMEX gold ended lower on Tuesday, reversing morning gains as traders avoided overreaching while the Federal Open Market Committee was holding its regular meeting on interest rates.

Gold futures trade wrapped up before the Fed discussions. Economists and bond traders expected the central bank to keep the target for the federal funds overnight lending rate between banks at a 45-year low of 1 percent.

December gold GCZ3 settled down $1 at $374.60 an ounce, its fifth consecutive losing session, amid mounting concerns about the largest speculative long position ever to hang over the market.

"Gold is very much doing its own thing," said Ian MacDonald, head of bullion dealing at Commerzbank. "The last week it looks like consolidation going on."

It traded in a range of nearly $5, from $377.40 to $372.50. A dealer said one bank appeared to have sold about 500,000 ounces, probably for a commodity fund.

Benchmark gold hit a seven-month high at $384.80 a week ago, on a combination of worries about the situation in the Middle East, a weak dollar and the recent spike in bond yields, which could throw cold water on the economic recovery.

Traders will be watching closely for what Fed policy makers say about the economy and inflation risks in their concluding statement, due around 2:15 p.m. EDT (1815 GMT).

"(The Fed) is kind of holding everything in check too," said a gold trader. "The dollar's pretty firm and all things considered its not looking so bad."

News that U.S. August consumer prices rose 0.3 percent, slightly below forecasts of a 0.4 percent rise, did not help gold's image as an inflation hedge. The 0.1 percent increase in the core rate was also less than expected and the underlying 1.3 percent annual rate was the lowest in 37 years.

Spot bullion XAU= closed at $373.55/4.25, off from $374.20/5.00 late Monday. London bullion dealers fixed the afternoon spot reference price at $374.60.

December silver 0#SI: rose 2.0 cents to $5.23 an ounce, trading from $5.175 to $5.24. Spot silver XAG= fetched $5.18/20, up from $5.16/18 late Monday, and was fixed at $5.165.

NYMEX October platinum 0#PL: fell $1.10 to $696.70 an ounce. Spot XPT= fetched $698.00/703.00.

December palladium 0#PA: jumped $15.65 to $222.70 an ounce, as New York speculators followed Asian buying on the reopen of Tokyo markets from Monday's holiday. Spot XPD= was at $215.50/221.50.