Gold futures in New York fell sharply on Monday but managed to close above earlier three-week lows as investors ditched positions amid a rallying dollar and talk of a possible cease-fire in Lebanon, dealers said.
At the COMEX division of the New York Mercantile Exchange, August delivery gold dropped $7.00 to end at $613.20 an ounce, after trading from $623.30 to $602.50 - its cheapest price since June 30.
The $600 level acted as technical and psychological support for gold and prices bounced off earlier lows by the close, but overall the yellow metal seemed unable to benefit very much from its usual status as a safe-haven investment.
"Downward pressure has resumed across the day as traders continue to unwind recently established longs following dollar gains and the start of US Secretary of State Condoleezza Rice's visit to Lebanon and Israel, and her urgent call for a cease-fire," said James Moore, an analyst with TheBullionDesk.
Rice flew unannounced to Beirut on Monday and, by the US afternoon, reports said she had insisted Hizbollah release two Israeli soldiers and pull back from the border before any cease-fire is established.
Earlier, on her way to the region, Rice had said she wanted to create conditions that stop the fighting, which has cost 377 dead in Lebanon and at least 37 Israeli lives in 13 days.
"We do not expect the ongoing Middle Eastern situation to drive gold higher, unless the scope of the conflict widens," John Reade, an analyst with UBS, said in a report. Jon Nadler, an analyst with bullion dealer Kitco, said: "There are still reliable ties to oil prices and to the dollar in some regards, but for the moment gold is happier trading at the levels it would have otherwise been trading at, absent the ugly realities of this summer's geopolitics." Analysts pegged chart support in gold at $600 and $580 and resistance at $620 to $625.
The dollar strengthened as investors trimmed bets made against it last week, when Federal Reserve chief Ben Bernanke struck a dovish tone on monetary policy. The dollar was up 0.5 percent at $1.2629 at midafternoon.
Spot gold fell to $612.10/612.85 an ounce, below Friday's late New York quote of $619.50/21.00, after falling as low as $601.60 earlier on Monday. Bullion dealers set the daily afternoon spot reference rate in London at $605.70.
COMEX September silver gained 7.5 cents to close at $10.92 an ounce, trading from $10.96 to $10.68. Spot silver rose to $10.84/10.94, from $10.78/10.88 on Friday. Monday's London fix was at $10.74.
NYMEX October platinum fell $11.20 to $1,209.30 an ounce. Spot platinum was quoted at $1,196/1,202. September palladium rose $4.25 to settle at $316.05 an ounce. Spot palladium hit $304/310.
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