US gold futures finished a tad lower in light volume on Monday, after sharp losses in volatile trading last week, as bullion investors took a breather when global financial markets stabilised.
George Gero, vice president at RBC Capital Markets Global Futures in New York, cited large open interest for the front-month gold contract and no major redemption's in bullion exchange-traded funds during last week's sell-off.
"All of that means that a lot of people who left the market are looking to come back in," Gero said. Most-active gold for December delivery on the Comex division of the New York Mercantile Exchange settled down 30 cents at $666.50 an ounce, trading between $662.30 and $670.60. George Nickas of FC Stone in New York said that things had settled down considerably, compared with last week, but gold traders were still in a defensive mode.
Nickas said that, while investors were still worried about inflation in the long term, which was bullish for gold, they were now focused on what other markets were going to do. On Friday, the US Federal Reserve cut the discount rate for direct Fed loans to banks by a half-percentage point to keep credit flowing and calm jittery global markets, and gold futures responded by a rally of more than 2 percent.
Nickas contended that the Fed.'s move was only a vehicle to stabilise the stock market and the operations of banks and brokerage houses, and that gold was still largely determined by its fundamental factors, such as supply and demand. Despite gold's volatile price swings last week, bullion used to back gold exchanged-traded funds remained steady.
Data showed that gold held by streetcar's Gold Shares, the world's largest bullion ETF by far, was little changed near its record level at about 507 tonnes as of Friday. Last week, December gold futures plunged as much as $30, as funds and investors liquidated bullion to raise liquidity and to cover losses outside of the commodity sector as stock markets tumbled on a global credit squeeze.
"When in doubt, people get out of positions. The opportunity now is that the shorts should be taking money out of the markets now," Nickas said. US stocks were up slightly in afternoon trade on Monday. However, John Reade, head of precious metals strategy at UBS in London, said in a client note that the credit problems could still affect gold in the short term.
"We expect further nervous, choppy trading in coming days, with liquidity tight and spreads wider," he said. "Positioning in gold and platinum is greatly reduced and physical demand is and will be supportive.
Palladium and silver remain much less of a fundamental story and any deterioration in sentiment could see liquidation pressure both metals," Reade said. Comex estimated final volume at only 54,959 contracts, and gold options at 9,446 lots. Turnover at Chicago Board of Trade's electronic 100-oz gold futures were 16,217 lots at 2:51 pm.
At 3:08 pm, spot gold was quoted at $657.60/658.20 an ounce, compared with $655.30/655.90 late on Friday. The London gold fix was $659.50. Comex September silver closed down 6.5 cents at $11.735 an ounce, dealing between $11.620 and $11.975.
Spot silver was quoted at $11.73/11.76 an ounce, compared with $11.69/11.72 late on Friday. London silver was fixed at $11.95. Nymex October platinum climbed $15.80, or 1.3 percent, to $1,247.40 an ounce. Spot platinum fetched $1,240.50/1,247.50 an ounce. September palladium finished up $2.20 at $331.95 an ounce. Spot palladium was quoted at $328/331 an ounce.