US gold futures reversed gains to finish a tad lower on Friday, capping an extremely volatile week as investors opted to lock in profits after initially hunting for bargains based on a weaker dollar and rising crude oil prices.
However, bullion dealers said the sharp fall in gold prices this week had not triggered a significant amount of physical buying. Platinum futures also rebounded 2 percent, after the world's biggest platinum producer slashed its output forecast for this year.
Most-active December gold on the Comex division of the New York Mercantile Exchange trimmed initial gains but was settled down 30 cents at $787.00 an ounce. It traded between $785.60 and $798.40.
The dollar slipped on Friday but was still on track for its biggest weekly gain against a basket of major currencies in a month, with dealers wary of adding much to extend bets against the greenback with so much uncertainty surrounding the credit market.
A nearly 2 percent jump in crude oil boosted gold's attribute as a hedge against oil-led inflation. US crude futures jumped $1.76 to $96.19 a barrel in trade. Jonathan Jossen, an independent Comex floor trader in New York, said that selling by commodity funds was seen in the sessions, but gold futures tracked the stronger euro and rising crude oil higher.
"With gold at near-record levels, a seasonal quiet period for gold demand in November and a record level of speculative long positions may well be the catalysts for a significant correction in the gold price," Walker said.
He said gold could fall to $725 to $750 an ounce on a spot basis prior to the year-end, but he expected gold to rebound into the first quarter of 2008, potentially hitting $900 during the quarter. Trading was choppy and the volume was high on Thursday.
Comex estimated final gold volume at 161,778 contracts, with gold options at 20,252 lots. Total turnover in Chicago Board of Trade electronic 100-oz gold futures was 33,419 lots at 2:11 pm.
On Monday, gold futures tumbled as much as 4.3 percent, marking their biggest one-day percentage loss since June 13, 2006, when they plunged 7.4 percent, according to Reuters data. Comex gold had shed as much as $52 just this week. It hit a contract high of $848 last on Wednesday.
The sharp decline prompted a drop in holdings in gold exchange-traded funds. Bullion used to back StreetTRACKS Gold Shares, the world's biggest gold ETF, which represents more than 80 percent of the total value of all such funds, dropped to 588.74 tonnes on Friday, from 599.50 tonnes on Monday. At 2:15 pm, spot gold was quoted at $784.80/785.50 an ounce, compared with $785.80/786.60 in New York on Thursday afternoon.
London bullion dealers fixed the afternoon spot reference price at $789.75. Comex December silver closed up 2.8 cents at $14.510 an ounce, trading between $14.365 and $14.745. Spot silver was quoted at $14.44/14.49 an ounce, compared with $14.35/14.40 late on Thursday in New York.
London silver was fixed at $14.45. Dealers said platinum benefited as Anglo Platinum, the world's biggest platinum producer, cut this year's output forecast to between 2.45 million and 2.5 million ounces of refined platinum from its previous forecast.
Nymex January platinum ended up $27.80 or 2 percent at $1,453.20 an ounce. Spot platinum was quoted at $1,446/1,451. December palladium declined $5.10 or 1.4 percent to close at $365.85 an ounce. Spot palladium was at $365/368.