US gold futures extended Friday's losses but finished off their lows on Monday, as rising crude oil prices increased the metal's appeal as a hedge against inflation. However, profit taking and chart-based weakness could weigh on gold in the near term after it had dipped below the key $900 level on Monday, dealers said.
Meanwhile, platinum contracts scaled a fresh record high above $1,800 an ounce as mining operation in top producer South Africa continued to struggle due to a power crisis. "It's definitely profit taking and technical sales because nothing else is moving. And it's breaking major support, which is Friday's low of $908. It looks like it's going to be weak in the near term," said Leonard Kaplan, president of Prospector Asset Management in Evanston, Illinois.
The gold contract for April delivery at the COMEX division of the NYMEX settled down $4.10 at $909.40 an ounce. It peaked at $917.40 initially and had bottomed at $896.00 in early morning trade, which marked a 1-1/2 week low.
Gold futures fell on Monday in spite of a largely unchanged dollar, as investors continued to take profits after the April contract had risen to a near record high on Friday.
April gold finished sharply lower in extremely volatile trade on Friday as a dollar surge and heavy profit taking erased the metal's initial gains following a weak US jobs report. George Gero, vice president of RBC Capital Markets Global Futures, said that a combination of options-related selling, technical sell-stops and liquidation due to contract rollover from February to April weighed on gold on Monday.
Meanwhile, HSBC raised its price outlook for gold, citing support from financial instability, inflationary pressure and a positive macroeconomic environment. "We remain wedded to the view that the USD (US dollar) will ultimately determine gold prices; although currently under pressure, we believe the likelihood of a USD recovery later this year holds the prospect of eventually drawing precious metals lower," James Steel, metals analyst at HSBC in New York, told clients in a research note. Steel raised his gold forecast to $850 from $825 for 2008, and to $725 from $650 in 2009.
In the US futures market, net speculative long positions rose modestly in the week to January 29 after three days of record highs, trade data on Friday showed, indicating that hot money flowing into the market could be cooling. COMEX estimated 1:00 am (1800 GMT) gold futures volume at 122,629 contracts, while gold options at 4,221 lots. Total turnover in Chicago Board of Trade electronic 100-oz gold futures was 24,482 lots.