Gold ended higher in quiet trade after seesawing on Monday, as investors used the falling dollar as an excuse to bargain-hunt while looking for cues from US economic indicators expected later this week.
Benchmark February gold at the Comex division of the New York Mercantile Exchange settled up $3.8 at $634.8 per ounce, traded in a tight range between $627.3 and $635.2.
Gold lacked a definite direction, touching a low of $627.3, last seen on November 20. The precious metal turned higher as the dollar reversed course and dropped. "Most of that was being done on a slightly weaker dollar against the major currencies, particularly the euro and the pounds," said David Meger, metals analyst at Alaron Trading, referring to gold's gain.
"There wasn't a whole lot of outside factors other than the dollar," said Meger, adding that there was not a lot of volatility and volume for gold as either. Estimated volume was 17,000 contracts, and options turnover was 5,500. Turnover in the Chicago Board of Trade's electronically traded 100-oz gold contract was 35,322 contracts as of 3:01 pm EST (2001 GMT). (http://www.cbot.com/cbot/pub/page/0,3181,297,00.html).
The dollar fell against the euro and pared gains versus the yen after ex-Federal Reserve chief Alan Greenspan warned investors to expect "a few years of dollar weakness." Gold slipped on Friday as the dollar rallied after solid US jobs data and US Treasury Secretary Henry Paulson's backing of a strong dollar.
A stronger greenback makes gold, which is denominated in dollars, less attractive for holders of other currencies. Gold has been moving in close tandem with the currency a market in the last several weeks.
"Copper had a firmer, which helped gold a bit. I think there was some short covering over from the weekend," said Edward Daly at York Commodities. March copper at the Comex division of the Nymex closed up 2.15 cents at $3.1335 per lb. Daly said he expected gold to dip as crude was falling slowly and steadily.
"If crude comes off, the dollar should firm and weaken gold," Daly said. Oil fell nearly a dollar as mild weather blanketed much of the United States, cutting into heating oil demand. But the drop in prices was limited, as dealers looked ahead to the Opec meeting on Thursday at which the group's ministers will consider deepening a production cut to drain soaring world energy stockpiles.
Gold is generally seen as a hedge against oil-led inflation. The next round of signals should come on Tuesday, namely the US international trades balance for October and the Federal Reserve Open Market Committee meeting, both potential movers for the currencies and gold, said Aaron's Meger.
Fed officials are expected to keep the language in their post-meeting statement signalling that interest rates are more likely to be raised further from 5.25 percent than be cut. Spot gold bullion was quoted at $629.20/630.70, up from $624.70/6.20 late on Friday.
Bullion dealers put London's fix at $626.75. Nymex March silver rose 13 cents to finish at $14.025 an ounce traded between $13.725 and $14.045. Spot silver was quoted at $13.79/13.86, up from Friday's late quote at $13.67/13.74. On Monday's fix was $13.72. Nymex January platinum climbed $1.4 to end at $1,109.2 an ounce. Spot platinum fetched $1,110.0/1,115.0. March palladium eased 20 cents to close at $333.75 an ounce. Spot palladium traded at $329/334.