COMEX gold futures grasped at the pivotal $400 an ounce mark Wednesday morning after declining overnight, as the dollar gained against the euro on a report that Iraqi security had found a nuclear missile cache in Iraq, trading sources said.
Silver prices crumbled lower in pursuit of gold, and platinum and palladium also slipped.
By 10:18 am EDT (1418 GMT), August gold on the New York Mercantile Exchanges COMEX division was down $3.50 at $398.60 an ounce, in trade from $402.40 to $397.60, its lowest level since July 7. Estimated gold turnover was 22,000 contracts at 10:00 am.
Prices stayed on the defensive as the dollar spurted higher after news that Iraqi security reportedly found missiles carrying nuclear warheads.
"(Gold prices) were certainly responding to the dollar strength, although the euro just bounced and the we bounced," said James Pogoda, vice president of precious metals at Mitsubishi International Corp. "Gold's very closely fading the dollar moves and tracking the euro."
Dealers peg support in August futures at $397.60 and resistance at $402-$402.50, and then at $405 and $406.
After Tuesday's close, gold sank under $400 as the dollar strengthened after Federal Reserve chief Alan Greenspan's comments to Congress on Tuesday supported expectations for a series of interest rate hikes in the months ahead. On Wednesday, Greenspan's testimony to the House of Representatives panel appeared identical to Tuesday's testimony.
Spot gold last was worth $398.30/8.80, down from the last New York close around $401.00/1.75. Wednesday's early fix in London was at $401.10.
COMEX September silver tumbled 16.2 cents to reach $6.45 an ounce, in a range of $6.615 to $6.42, and touching its lowest mark since July 14. Spot silver hit $6.46/49, versus Tuesdays close in New York at $6.57/60. Wednesdays London fix was at $6.47.
NYMEX October platinum slipped $3.30 to $830 an ounce. Spot platinum traded to $829.00/834.00 an ounce. September palladium fell $2.85 to $229 an ounce. Spot palladium was at $225.00/230.00 an ounce.
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