US gold futures ended lower but held above $650 an ounce on Friday, reversing early gains, as traders opted to lock in profits ahead of the weekend despite the dollar's continued struggles.
"The market was a little bit disappointed that gold wasn't able to react to the weaker dollar," said Steve Platt, an analyst at Archer Financial Services. Platt said that there had been some light profit taking throughout the session ahead of the weekend, and the gold market was also consolidating its recent gains. Platt said he expected increasing inflationary expectations and weakness in the dollar would continue to underpin the gold market.
Benchmark February gold at the COMEX division of the New York Mercantile Exchange fell $2.30 to settle at $650.60, trading in a range between $649.20 and $655.50.
Estimated COMEX volume was 44,000 contracts, and options turnover was 13,000. Turnover in the Chicago Board of Tr Hudson River Futures' Carlos Perez-Santalla said gold turned higher early in the session largely because of the weak dollar.
"It's also a new fiscal year for a few companies. People are starting to trade more aggressively than they had for the last two months," said Perez-Santalla. "So things are starting to shift to a better trading environment."
The dollar slid to its lowest levels in months against most major currencies after weak US factory data reinforced expectations the Federal Reserve would cut benchmark interest rates next year.
The Institute of Supply Management survey of US national manufacturing, the ISM index, had its lowest reading since April 2003 at 49.5. A reading under 50 indicates a contraction. A soft greenback makes gold, which is priced in US dollars, more attractive for holders of other currencies.
The government provided more evidence of a weak housing sector, reporting that US construction spending fell a more-than-expected 1 percent in October, led by a seventh straight drop in private residential building. The February contract was trading lower early in the session and dipped as low as $649.2 before the dollar further declined on the release of the US economic data.
Despite hitting new lows against major currencies, the dollar did not fall or rise enough in the last two days to trigger fresh buying or profit taking for gold, said George Nickas, a futures broker at FC Stone. "The unemployment figures next Friday will probably be the next significant (data) for the market to trade around," Nickas said.
November US unemployment rate and nonfarm payrolls are due at 8:30 am EST (1330 GMT) on December 8. Spot gold bullion eased to $645.20/646.20 from $647.20/$648.20 in late trade on Thursday. Bullion dealers fixed London's afternoon spot reference price at $648.75. NYMEX March silver finished up 7.5 cents at $14.190 an ounce, trading between $14.030 and $14.250. Spot silver was last quoted at $13.980/14.050 from $13.920/13.990 on Thursday. Friday's fix was $13.850. NYMEX January platinum fell $22.20 to $1,154.50 an ounce. Spot platinum fetched $1,153.00/1,168.00. NYMEX March palladium dropped $1.60 to $332.75 an ounce. Spot palladium traded at $328/333.