US gold futures ended a tad higher on Monday despite lacking a definite direction, following solid gains in the previous two sessions, and analysts warned that investors could further liquidate their long positions. Other precious metal contracts also followed bullion to finish higher, with both platinum and silver closing at two-week highs.
Most-active gold futures for April delivery on the Comex division of the New York Mercantile Exchange settled up 40 cents at $654.30 an ounce. They traded in a tight band between $652.50 and a high of $657.10 in electronic trade, the loftiest level since March 9.
Gold futures largely held ground after China's central bank said on Saturday that it was raising interest rates for the third time in less than a year to put a lid on credit and investment and to crimp consumer spending. Greg Weldon, chief executive of weldononline.com, said that China's rate hike could be supportive to gold prices because the government did not actually cramp down on credit growth and failed to tighten monetary supply.
"They are raising rates but they are not keeping pace with the rise of inflation, and the rise of bank lending. They are not acting fast enough or more aggressively enough to have an impact," Weldon said.
On Friday, China's central bank said it would gradually relax controls over the import and export of gold and allow more foreign access to domestic futures markets. Weldon said that gold seemed to be trapped in an area between $640 and $660, and he did not see any technical trend developing until prices broke out of the $20-range.
Comex estimated final exchange floor volume at only 8,000 lots. Turnover in the Chicago Board of Trade's electronically traded 100-oz gold contract was 19,313 lots as of 3:01 pm EDT (1901 GMT). (http://www.cbot.com/cbot/pub/page/) Leonard Kaplan, president of Prospector Asset Management, said that on Monday's trading was very quiet and that investors were focusing on the stock markets.
US stocks were up broadly, with both the Standard and Poor's Index and the Dow Jones Industrial Average up about 1 percent. Kaplan said that many precious metals investors tended not to trade ahead of the Federal Reserve's rate decision due on Wednesday.
In the week up to March 13, for gold, speculators or noncommercials were net long on 96,342 contracts, down 5 percent from a previous long of 101,698, the Commodity Futures Trading Commission said in its weekly Commitment of Traders report. Open interest rose to 394,090 lots from 382,550. "With somewhat less long liquidation than we expected we have not received the clear signal that gold has bottomed.
Although positions are greatly reduced, there could be more long liquidation to come," John Reade, analyst at UBS, said in a daily report. Weldon said that the recent pullback in gold prices already sparked some liquidation, but he warned that any further decline in prices could intensify selling pressure on long positions.
Investors now await US housing starts data due on Tuesday, the Fed.'s rate-setting meeting on Wednesday, and existing home sales on Friday. Spot gold was quoted at $653.30/4.30, above $651.90/2.90 an ounce on Friday. London's afternoon gold fix rose to $655.00 an ounce.
Comex May silver ended up 1.8 cents at $13.233 an ounce traded in a range between $13.115 and $13.295. Spot silver strengthened to $13.16/3.19 an ounce, up from $13.13/3.16 late on Friday. The London silver fix was $13.16. Nymex April platinum gained $13.50, or 1.1 percent, to close at $1,234.70 an ounce. Spot platinum was higher at $1,230.00/35.00 an ounce. June palladium settled up $1.70 at $354.10 an ounce. Spot palladium was quoted even at $352.00/57.00 an ounce.