US gold futures finished about $1 lower on Tuesday on profit-taking following strong gains from last week and news of larger-than-usual central bank gold sales, which could dent investor sentiment in the short run, analysts said.
Most-active August gold on the Comex division of the New York Mercantile Exchange settled down $1.20 at $675.10 an ounce, traded in a tight range from $674.10 to $678.80. "We thought it was a little bit overdone over the last few days," said Joseph Gizzard at Saibu Commodities from the Comex floor.
"We're looking for the market to give back a little bit." Gizzard said a lower dollar on Tuesday provided support to gold and silver prices. August futures gained more than $15 last week on inflation worries and a weaker dollar. The dollar touched a three-week low against the euro after Federal Reserve Chairman Ben Banana said he expected the US economy to continue growing but weakness in the housing sector would probably remain a drag.
Comex estimated final gold volume at 64,282 lots and options turnover at 11,888 lots. Turnover in the Chicago Board of Trade's electronically traded 100-oz gold contract was 17,380 lots as of 2:21 pm.
Bullion investors largely shrugged off news that the Bank of Spain sold almost a million ounces of its gold reserves in May. The bank has been cutting gold reserves steadily since the middle of last year. It also sold 1.3 million ounces, or 40 tonnes, in both March and April. The European Central Bank also said on Tuesday that gold and gold receivables held by euro zone central banks fell by 29 million euros to 179.995 billion euros in the week ending June 1.
Heavy gold sales from European central banks over the past several months have taken a toll on bullion investor sentiment. Neal Ryan, director of economic research at Blanchard & Co, said that recent gold sales by the ECB had exceeded its rate in the past.
"The fact that the price has held up during this sharp increase is nothing short of remarkable, and should highlight ... the underlying strength in the market," Ryan said. UBS Investment Bank said in a research note that a large government sale was not positive for the short-term outlook for gold.
"We are certainly not calling for the gold price to collapse but suspect that the next five or so dollars will be lower rather than higher," UBS said. Spot gold traded at $669.20/0.70 an ounce, down slightly from $670.50/2.00 an ounce late on Monday. The London afternoon gold fix was $671.50.
Comex July silver finished up 6.70 cents at $13.812 an ounce. It peaked at its highest level since April 26 at $13.87 during electronic trade, up from a session-low at $13.72.
Spot silver firmed to $13.75/13.78 from $13.69/13.72 late Monday. The London silver fix was $13.71. In platinum group metals news, Japan's top trading house Mitsubishi Corp said spot platinum may consolidate in the next one to three months but could hit a record high of $1,400 an ounce in the fourth quarter. Nymex July platinum closed $4.20 lower at $1,298.80 an ounce. Spot platinum was quoted at $1,291/1,296 September palladium fell $5.90, or 1.6 percent, to end at $371.60 an ounce. Spot palladium fetched $365/368.
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