Gold futures in New York closed lower on Monday on speculative selling sparked by a firm dollar and softer oil prices, but the metal remained propped up by levels of technical chart support, dealers said.
August delivery gold settled at $572.40 an ounce, off $9.30 or 1.6 percent from Friday, on the New York Mercantile Exchange's Comex division, after trading a range of $588 to $569.10. "Traders tried to break the market down through initial support at $560 to $565, but the market bounced back," said Darin Newsroom, a markets analyst at DTN in Omaha.
Gold traders said the metal mostly was reacting to moves in the dollar and oil prices. But one dealer said another reason for the sell-off in metals starting overnight was a report that China will move to tighten credit lending by lifting banks' reserve requirements, which analysts say should decrease demand for commodities.
"That's an indication that they (China) are going to slow their growth make it more steady and that is going to hurt the metals," a precious metals trader in New York said. "If gold breaks down below $540, I think it's in trouble," he added.
Comex futures have traded in a range of $546 to $589 in the last week, since plunging back below $600 on June 13 on aggressive cross-commodities liquidation. Gold hit a 26-year high of $732 an ounce in mid-May.
The Japanese yen also was pressured by reports of missile testing in North Korea. A strong greenback undermines sentiment in gold, which is mostly priced in dollars globally, because metal gets more expensive in key trading centres such as Asia and Europe.
Crude oil fell to $69 a barrel after major oil exporter Iran said there was a positive atmosphere in the dispute over its atomic work, easing concern about threats to oil supply. Gold often tracks oil because investors use it as an inflation hedge when energy prices are high.
The latest US Commitments of Traders data from the Commodity Futures Trading Commission on Friday showed investment funds still had close to 100,000 contracts of long positions in Comex gold futures by last week. The net fund long position as of June 13 rose to 99,287 contracts, from 95,869 lots previously.
In spot gold, the price fell to $568.80/569.50 an ounce, vs. on Friday's New York close at $578.00/8.70. The London afternoon bullion fix hit $571 on Monday.
James Moore, analyst with TheBullionDesk, said bullion was looking set to spend more time trading between $580 and $550, the latter level being where technical and physical buying probably would kick in.
Comex July silver lost 16 cents, or 1.6 percent, to close at $9.97 an ounce, dealing between $10.27 and $9.82. Last on Wednesday, silver slumped to a four-month low of $9.45. Spot silver reached $9.97/10.07 an ounce, vs. $10.13/10.23 previously. Silver fixed at $9.89.
"Volatility and broad price swings look set to remain the norm for the industrial precious metal in the coming sessions, although the support found in both gold and copper is likely to prove positive," Moore said. Nymex July platinum shed $6.80 to end at $1,137.80 an ounce. It reached a two-month low of $1,095 last week. Spot platinum was stuck down at $1,138/1,144. September palladium tumbled $10.95 to $295.10 an ounce. It dropped last on Wednesday to a four-month low of $267.10. Spot last fetched $290/295.