US gold futures closed off from a fresh 16-1/4-year high on Tuesday, as traders pocketed profits from the market's rally to almost $450 an ounce after the dollar slumped to a new record low against the euro. Most activity was positioning before this week's Thanksgiving holiday and before Comex December options expired at day's end, dealers said, though demand based on the strong first week of trade in the gold-backed streetcar's security on the New York Stock Exchange continued to support gold.
December delivery gold on the New York Mercantile Exchange's Comex division fell $1.10 to $447.90, in a range between the overnight low of $446.10 and $449.90, which marked the highest price for benchmark futures since July 1988.
Gold in dollar terms has been surging in recent weeks as the euro rallied to record highs. The six-year old euro peaked at $1.3105 on Tuesday, while the yen this week reached its strongest level since March 2000 against the greenback, arming overseas investors with greater bullion purchasing power.
"I remain bullish on this market, but it must be noted that the gold price is only following the demise of the dollar," said Leonard Kaplan, president of Prospector Asset Management, in a report.
"Any rally in the currency will force gold lower." The euro was worth $1.3083 at Midafternoon on Tuesday. Investor purchases of streetcar's, certificates of ownership in physical gold held in trust require banks that administer the fund to buy bullion in the open market.
"It's hard to be short given that from a technical perspective it looks very firm and also because this (gold security) continues to put a half a million ounces of demand in the market," said a trader.
"It will burst at some point, but from $450 or $480? That's the big question." Speculators have accumulated a huge bullish position in Comex gold. Much of the volume was switches as funds rolled long positions from December gold into February futures, and to a lesser extent June gold, before first notice day next week.
"There's option expiration today," said a floor broker, adding that there were "more switches than anything else here." Estimated turnover was massive 150,000 contracts, with 30,288 switches.
Comex and Nymex markets will be closed on Thursday and Friday for Thanksgiving. Bullion peaked at $449.50. Spot gold last touched $447.55/8.30, down from Monday's late level at $448.25/9.00.
The afternoon fix in London was at $448.15. December silver closed down 1.7 cents at $7.555 an ounce, trading $7.615 to $7.505. It hit a seven-month high at $7.75 last week. Spot silver was unchanged at $7.53/56.
London's fix was $7.565. January platinum rose $1.70 to end at $856.90 an ounce. Spot platinum last priced at $851.00/855.00. December palladium lost $1.30 to $217.20 an ounce. Spot palladium traded to $213.00/219.00.
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