Gold futures in New York fell but ended above a fresh two-week low on Wednesday, as speculators trimmed back some of their huge position in the market amid a choppy performance in currencies, traders and analysts said.
The spectre of long liquidation had been overhanging the market due to the record-high fund net long position on Comex, and a late bounce in the dollar may have been the spark to set off the selling.
"The volume was pretty decent so I believe there was some spec liquidation going on as well as technical selling," said Tom Boustead at Reface in New York.
"It was very currency-driven. I think that if we breach support at $440, that is going to get us down toward $438," he said.
December delivery gold on the New York Mercantile Exchange's Comex division fell $2.10, or 0.5 percent, to $442.20 an ounce its lowest close since on Friday after zipping around in a range of $445.70 to $440.60.
Gold rose initially on Wednesday as the dollar fell after a report showed durable goods orders in July fell much more than expected, tumbling 4.9 percent, against expectations for a 1.2 percent decline.
But a turnaround in the greenback later touched off selling in the gold, dealers said.
One major barrier to the upside had been the potential for a sell-off if futures longs liquidate non-commercial net longs on Comex hit a record high 157,607 lots in the latest week's CFTC data.
Now, traders said the market might be on hold until on Friday for a reaction when OTC (over-the-counter) options expire and Federal Reserve chairman Alan Greenspan gives a speech.
Rising crude prices could lend support to gold as a safe-haven investment in the interim, however, as a storm brewing in the Caribbean pushed oil back over $67 a barrel.
The nearby US crude contract was up at a record high of $67.40. The euro climbed to $1.2275 from levels late on Tuesday near $1.2237.
A lower dollar usually lifts gold, which is mostly priced in dollars worldwide, as it gets cheaper in key overseas trading areas such as Asia and Europe.
Final estimated Comex gold volume was busy at 70,000 contracts, versus on Tuesday's quiet tally of 24,687 contracts. The level of trader participation in Comex gold has risen sharply lately.
Open interest was up 160 lots at whopping 331,804 contracts as of August 23. Independent technical analyst Dan Chelsea pegged short-term support in Comex December gold at $440 and resistance at $455.
Bullion fell to $437.20/437.90 an ounce, below on Tuesday's late New York quote at $439.10/9.80. The late London fix was at $440.
September silver lost 4.6 cents to $6.922 an ounce, after trading $7.02 to $6.88. Rollover into December futures continued steadily before delivery period begins next week.
Spot silver slipped to $6.90/93 an ounce from $6.95/98 previously. It fixed at $6.965. In Nymex trade, October platinum rose $1.80 to $899.90 an ounce.
Spot platinum was quoted at $895/899. Illiquid September palladium fell $1.25 to $184.50 an ounce. Spot last traded at $183/185.