US gold futures turned higher early Wednesday, shaking off initial losses amid safe-haven buying as nervous investors continued to fret about credit markets and the dollar eased off its highs versus the euro.
Palladium fell after posting steep losses in the last several sessions, weighed down by chart-based commission house sales and long liquidation amid light volume, a floor trader said. At 10:19 am EDT (1419 GMT), most-active gold for December delivery on the COMEX division of the New York Mercantile Exchange was up $1.20 at $680.90 an ounce, trading between $672.50 and $681.20.
COMEX September silver was down 9.8 cents at $12.650 an ounce, dealing between $12.335 and $12.765. "It's just asset allocation. If you're going to trade off the currency, you have to be selling gold," independent trader Jonathan Jossen said from the COMEX floor, referring to gold futures' early losses.
Jossen said that a large number of gold futures call options were bought in the last few sessions, despite the fact that bullion prices had dropped over the same period. Jossen noted that Wednesday is the 15th of the month, the day to request redemption's for many hedge funds, and that could weigh on financial markets.
Traders and analysts said that the precious metals complex had held up pretty well considering steep losses in the stock markets because of liquidity fears.
"Gold has been an oasis of calm compared to the deep losses seen across other asset markets over the past month," John Reade, head of precious metals strategy at UBS in London, said in a client note.
Reade said he believed that the longer the current credit squeeze went on, the more likely that gold would attract safe-haven buying. He also noted small additions to the gold exchange-traded fund (ETF).
Data showed that gold held by StreetTRACKS Gold Shares, the world's largest bullion ETF by far, rose to a record high of 510.21 tonnes as of Tuesday. Spot gold was quoted at $667.60/668.20 an ounce, compared with $668.30/668.90 late Tuesday. The London morning gold fix was $665.00.
Spot silver was quoted at $12.60/12.63 an ounce compared with $12.69/12.72 late Tuesday. London silver was fixed at $12.510. Meanwhile, palladium futures fell sharply on Wednesday and have dropped nearly 6 percent from a session-high of $365.50 last Wednesday.
September palladium was down $6.70 or 1.9 percent at $348 an ounce. Spot palladium was quoted at $345.50/349.50 an ounce. Ralph D'Esposito at RJ Futures said from the NYMEX floor that palladium fell because of light liquidation and selling by commission houses after sell-stops were triggered. He said volume was not heavy.
D'Esposito said that bids were seen below key support levels and he expected prices to rebound soon. NYMEX October platinum fell $6.50 to $1,270.50 an ounce. Spot platinum fetched $1,263/1,266 an ounce.
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