US gold futures climbed slightly in quiet trade early on Friday as the dollar fell against major currencies, and as jittery bullion investors added light positions ahead of the weekend.
"The outlook of gold all depends on the level of fear in the market, the credit and the subprime issue. That's really driving it," said Leonard Kaplan, president of Prospector Asset Management in Evanston, Illinois.
At 10:24 am EDT (1424 GMT), most-active gold for December delivery on the COMEX division of the New York Mercantile Exchange was up $1.90 at $670.30 an ounce, trading between $666.70 and $671.70.
Kaplan said that he was not too impressed that gold was only up slightly given that the euro gained and the dollar fell sharply. "I thought gold would have responded more favourably," he said.
Kaplan also cited very low volume in pre-weekend trading. "Everybody is kind of nervous about it (the credit squeeze), and gold is not cheap up here. Gold has simply been following the subprime issue like everything else," Kaplan said.
This week, investor sentiment has improved with a growing sense of calm and confidence returning to global financial markets, reflected by gains in the stock markets and falling bond prices. US stocks were higher in morning trading on Friday, while global stock markets also steadied.
Jon Nadler, analyst at Kitco Bullion Dealers in Montreal, said in a client note that gold's gains were buoyed by a decline in the US dollar against a basket of major currencies and by light pre-seasonal physical buying from India. Nadler said that, however, gains continued to be tenuous as trading decisions were still influenced by the level of anxiety surrounding the credit markets. "Much still depends on the behaviour of the equity markets and that remains linked to how the unfolding crisis is perceived in terms of its economic and market psychology impacts," Nadler said.
In US economic news, a Commerce Department report showed on Friday that sales of new US homes unexpectedly rose 2.8 percent to an 870,000 annual sales pace in July, reversing two months of declines, and inventories eased.
Spot gold was quoted at $661.20/661.50 an ounce, compared with $659.20/660.00 late Thursday. The London morning gold fix was $659.75. COMEX September silver was up 5.0 cents at $11.69 an ounce, dealing between $11.58 and $11.74. Spot silver was quoted at $11.67/11.71 an ounce, compared with $11.69/11.72 late Thursday. London silver was fixed at $11.70.
NYMEX October platinum dropped $3.10 to $1,242 an ounce. Spot platinum fetched $1,237/1,244. September palladium was down $4.55, or 1.4 percent, at $323.30 an ounce. Spot palladium was quoted at $321.50/324.50.
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