Comex gold futures tumbled on Friday but still closed above five-week lows, as the market continued to grapple with fund selling and a surging dollar, countered by only limited physical demand at lower prices, dealers said.
In other precious metals trading, silver hitched a ride south with gold, while platinum and palladium hit there lowest in more than a week. "Gold's on a leg down after we took out that critical $392 level", said Ralph Despotise, trader at RJ Futures, who added that speculative long liquidation swept through the metals complex.
August gold dived $4.80 to settle at $390.50 an ounce on the New York Mercantile Exchanges Comex division, after trading from $396.50 to $387.40 its lowest mark since June 17. With the fall, gold ducked out of its recent trading range between $408-$392.
Final estimated turnover was a heavy 85,000 contract. The market broke below $395 support overnight on the dollars multiweek highs against the euro, then took out the next key chart level at the July 7 low of $392.40 at the New York open as fund players lightened up on more long positions, dealers said.
"Gold has very definitely been trading in line with the dollar and the euro," a dealer at a North American bullion desk said.
He added that funds seemed to be getting rid of many recently acquired long positions this week. Open interest in Comex gold fell 2,024 to 247,292 lots, after on Thursday's bout of fund selling shook August futures down $2 to $395.30.
"We've seen some reasonable physical interest in the marketplace at lower prices," he added, "but above the $400 figure, interest is extremely light." The dollar shot to a 3-1/2-week peak against the euro after upbeat comments on the US economy this week by Federal Reserve Chairman Alan Greenspan.
The euro was last at $1.2120 in mid-afternoon. Greenspan optimistic mood boosted expectations for interest rate rises, which typically drive the dollar higher and dent demand for gold, analysts said. When the greenback strengthens, dollar-denominated gold becomes costlier for non-US buyers.
Traders peg support in Comex August gold futures at the $389-$387 area, with resistance looming up at $398 and $400 an ounce.
Spot gold's last priced at $389.70/0.20, sharply down from Thursdays New York closing level of $395.00/5.75. On Fridays afternoon fix in London was at $391.50. Comex September silver fell 8.3 cents to end at $6.345 an ounce, within a range of $6.445-6.24, its lowest since July 8.
Spot silver changed hands at $6.30/33, versus late on Thursdays quote at $6.39/42. On Fridays London fix was at $6.31. Nymex October platinum shed $10.20 to $816 an ounce, trading between $826 and $812, the weakest mark since July 8.
Spot platinum was worth $816.00/821.00 an ounce. September palladium was down $3 at $222.75 an ounce, within a $225.75-$220 range, touching its lowest since July 13. Spot palladium last fetched $218.00/223.00 an ounce.