US gold futures finished a touch lower on Wednesday, whipsawed by selling related to options expirations and higher crude oil prices, and traders said further volatility could be seen in the near term.
Most active gold for June delivery on the Comex division of the New York Mercantile Exchange settled down 30 cents at $687.40 an ounce traded from $685.80 to $690.00. Jonathan Josses, an independent trader, said that gold should end higher on Wednesday given the strength of the energy markets. "The lack of move is probably options-related," he said from the Comex floor.
Other traders also said that on Wednesday's expirations of Comex might silver and gold options might keep the market from rising more. Josses said that the over-the-counter gold options were scheduled to expire on Thursday, and that could add volatility due to the interaction of different trading strategies as investors mulled over whether to exercise the options.
Comex estimated final exchange floor volume at a modest 49,433 lots and options turnover at 10,372. Turnover in the Chicago Board of Trade's electronically traded 100-oz gold contract was 22,083 lots as of 2:41 pm EDT (1841 GMT). http://www.cbot.com/cbot/pub/page/
James Moore, analyst at TheBullionDesk.com, said in a research note that bargain hunting in European trade pushed prices higher, but fund and technical sell orders put gold under pressure at the US pit session.
"Options expiration this week may reduce the scale of selling above $690 (spot basis). However, with momentum indicators pointing lower, gold could face further technical selling, potentially triggering a test back to $676," Moore said. Spot gold was quoted at $684.50/5.00 an ounce, above a late quote of $684.10/4.60 in New York on Tuesday.
London's afternoon gold fix was $684.00. US crude futures ended up $1.26 at $65.84 a barrel on Wednesday. Gold is generally seen as a hedge against oil-led inflation. James Quinn, commodity commentator at A.G. Edwards, said that light selling from independent traders could be seen in trading. "The weaker dollar should underpin these metals markets," Quinn said.
Quinn said that gold futures would try to retest $690 level because it had broken above it this week. The dollar fell to a two-year low against a basket of major currencies on Wednesday and came within a whisker of its record low against the euro after soft US housing data could signal slowing economic growth.
A report showed that sale of US new homes rose 2.6 percent but fell short of expectations by analysts. A lower dollar makes gold cheaper for investors holding other currencies.
In other precious metals, silver tracked gold to finish lower. Comex may silver closed down 1.70 cents at $13.765 an ounce traded from $13.730 to $13.890. Spot silver was quoted at $13.78/3.83, compared with $13.78/3.81 late on Tuesday.
Silver was fixed at $13.790 in London. The platinum group metals rebounded after falling sharply on Tuesday. Precious metals consultant GFMS Ltd said that platinum might hit a record high of $1,450 an ounce on bullish sentiment and a weak dollar despite a potential surplus.
June palladium gained $4.05, or 1.1 percent, to end at $383.05 an ounce. Spot palladium fetched $378.00/383.00. July platinum closed up $5.70 at $1,317.20 an ounce. Spot platinum was quoted at $1,298.00/1,303.00.