US gold lower

US gold futures finished lower on Friday as crude oil prices tumbled and after a robust US jobs report lowered the chance of a large cut in key interest rates by the Federal Reserve next week. Precious metals could rally in 2008 as the US dollar falls and supply flattens J.P. Morgan said, ranking the sector the strongest among all commodities for next year.
"Gold has been following oil. Also with the (job) numbers that came out, it shows the economy is fairly strong, and the chances of the Fed cut of 50 basis points is diminishing. Now people are thinking it's only going to be a quarter point," said Leonard Kaplan, president of Prospector Asset Management in Evanston, Illinois. Most-active February gold on the Comex division of the Nymex settled down $6.90 at $800.20 an ounce. It hit a low of $796.40.
The US government reported that employers added 94,000 jobs in November, a larger-than-expected number, and analysts said that might prompt a more modest-than-expected interest rate cut next week. An interest rate cut lowers the cost of borrowing and makes bullion more attractive compared with fixed-income investments.
"And don't forget, when gold ran to its highs, there was severe resistance. With the stock market relatively strong, and with the bonds lower and oil lower, it doesn't have a chance," Kaplan said. The February contract had been rising toward $850 twice in November but both rallies were followed by heavy losses.
Gold futures initially jumped and hit a session high of $811.10 after the payroll report as the dollar lost ground versus the euro, but gains soon fizzled as the crude oil losses accelerated.
US crude oil futures fell more than $2 to about $88 a barrel on Friday, resuming a steep slide spurred by rising worries about the economy of top consumer the United States. Falling energy prices dent gold's appeal as a hedge against oil-led inflation. Comex estimated final gold futures volume at modest 101,885 contracts, with gold options at 5,328 lots.
Total turnover in Chicago Board of Trade electronic 100-oz gold futures was 20,742 lots at 2:31 pm US bank J.P. Morgan told clients in a note that its favourite precious metals continued to be gold and platinum, with their respective prices expected to average $815 an ounce and $1,475 an ounce for 2008, with risks strongly skewed to the upside.
"Precious metals have the most scope to rally given their leverage to currency markets and supply constraints. Mining supply growth will likely be flat in gold for the next four years, while platinum and palladium will likely remain in deficit next year," the bank said.
This week, gold futures have been largely trading in a wide range between $790 and $810, weighed by a recovering US dollar and a volatile energy market. Greg Weldon, chief executive at weldononline.com, told clients in a note that gold had rallied against all global currencies since 2002 because of a growing money supply and skyrocketing credit creation. Gold is also seen as an alternative currency to owning the greenback. At 2:15 pm EST (1915 GMT), spot gold was quoted at $794.90/795.70 an ounce, compared with $803.20/803.90 in New York on Thursday afternoon. London bullion dealers fixed the afternoon spot reference price at $792.50.
Comex March silver finished down 12 cents at $14.505 an ounce, trading between $14.395 and $14.705. Spot silver was quoted at $14.33/14.38 an ounce, compared with $14.45/14.50 late on Thursday in New York. London silver was fixed at $14.44. Nymex January platinum ended down $8.00 at $1,462.20 an ounce. Spot platinum was quoted at $1,455/1,460. March palladium fell $4.05 or 1.2 percent to end at $347.65 an ounce. Spot palladium fetched $345.50/348.50.