Gold futures settled lower on fund and bank selling on Thursday, after inflation fears due to pricey oil and a busy hurricane season lifted the metal to near-18-year and contract highs, dealers and analysts said.
Gold lost some of its shine after a weeklong rally, as traders cashed in on gains from the rapid rise to its highest level since January 1988.
"We've had a pretty sharp move higher and we've had another big increase in speculative length," said David Rinehimer, head of futures research at Citicorp Global Markets.
"Usually when we get that, we see some sort of correction, depending upon what we see in some of the other markets," he added. "A lot will depend on what happens over the weekend with Hurricane Rita."
December delivery gold on the New York Mercantile Exchange's Comex division lost $2.30, or 0.5 percent, to finish at $470.3 an ounce, after trading from $479 to a three-day low of $466.80.
"The market is short-term overbought and we needed a correction," said James Quinn, commodities commentator at AG Edwards & Sons.
Investors have been turning to the precious commodity amid fears of more storm damage and high-energy prices choking off US economic growth.
Currencies played only a secondary role to trading, despite gold's historical inverse correlation to the dollar, Quinn said. US crude prices were strong near $67 a barrel as oil companies shut refineries and offshore rigs with Hurricane Rita heading for the Texas coast.
Texas is home to around a quarter of US refinery capacity. Oil hit a record of $70.85 on August 30, a day after Hurricane Quatrain struck the US Gulf Coast.
Leonard Kaplan, president of Prospector Asset Management, said fund liquidation was the key feature to trading on Thursday.
A giant Comex gold fund net-long position and open interest close to the November 2004 record high above 370,000 contracts, were bearish technical signals for trading, traders have said.
Open interest rose by 2,588 contracts to 365,903 lots on Wednesday.
But gold prices remain underpinned by fundamentals like strong bullion demand, lower global mine production of late and fewer sales from central bank reserves, analysts said.
Bullion hit a near-18-year high at $475 overnight in Asia. At the last check, spot gold had fallen to $465.40/466.10, from Wednesday's New York close at $469.90/0.60.
On Thursday's afternoon London fix was at $466.25. Comex December silver ended flat at $7.415 an ounce, after moving from $7.355 to a three-month high of $7.52.
Spot silver was indicated at $7.33/36, versus $7.35/38 previously. It fixed at $7.4225. Nymex October platinum lost $6.30 to $930 an ounce. The market hit an eight-month high this week near $939.
Spot platinum stood at $922/926. December palladium shed $2.15 to $201. Futures on Tuesday reached a near six-month high at $208.90. Spot palladium was at $195/200.
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