Gold futures in New York settled 1.9 percent lower on Friday, slammed in thin volume by speculative profit-taking before the weekend, traders said. The market had climbed in early trade before suddenly retreating sharply at noon, as investors pared holdings in metals and other commodities like crude oil and coffee.
At the New York Mercantile Exchange, August delivery gold at the COMEX division dropped $12.30 to finish at $620.20 an ounce, within a $638-to-$616 range.
"The market had difficulty holding the gains from the last few days when it rallied on some Mid-East and North Korea anxieties," said James Quinn, commodities commentator at AG Edwards & Sons.
"We probably should have held $630 in gold and $11 in silver," Quinn said.
Gold rose to a seven-week high on Monday as fighting between Israel and Hizbollah guerrillas in Lebanon raged, which prompted buying of safe havens like gold.
But thin trading interest throughout the week and profit-taking ultimately dragged gold down $57 from Monday's high at $677.50. "The liquidity's dried up and there aren't a lot of people who want to be long or short," a trader at a metals desk said earlier Friday.
Strife in the Middle East remained supportive to gold, however, analysts said.
Israel warned civilians in Lebanon to leave border villages on Friday and called up thousands of reserves in a possible prelude to a ground offensive that would expand its 10-day-old campaign against Hizbollah guerrillas. Final estimated COMEX gold volume was 86,000 contracts, with 14,737 switches, above Thursday's light tally of 55,259 lots.
Volume in metals trading tends to be slim in July and August due to vacations and industrial shut-downs, until physical demand picks up again in September. The dollar weakened across the board Friday on growing speculation that the Federal Reserve may be ready to pause its rate raising campaign next month.
Rate hikes usually boost the dollar and pressure gold. The euro, which gold frequently tracks closely, was up 0.4 percent at $1.2680 at midafternoon. Minutes from the latest Fed meeting in June showed central bankers were uncertain about future rate steps and wanted to see more economic data before deciding whether more credit tightening was needed.
Spot gold fell to $619.50/621.00, off from Thursday's late New York quote at $632.00/3.00. Bullion dealers set the daily afternoon spot reference rate at $634.
John Reade, an analyst with UBS, said technical support lurks near the 100-day moving average at $614-615/oz. "Minor resistance is up at $635-637/oz, and major resistance is at $650-652/oz." US crude oil, after a choppy day, rose to $74.50 a barrel. Traders sometimes use gold as an inflation hedge when energy prices rise.
COMEX September silver lost 22.0 cents to $10.8450 an ounce, trading $11.31-$10.76. Spot hit $10.78/10.88, from $10.98/11.08 previously. It fixed at $11.01.
NYMEX October platinum slipped $5.80 to $1,220.50 an ounce. Spot platinum fetched $1,206/1,212. September palladium was down 20 cents at $311.80 an ounce. Spot palladium ended at $301/306.
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