US gold futures dropped in volatile trade on Thursday, but bargain hunting and commodity strength erased initial losses after bullion briefly falling below $700 an ounce on heavy selling by commodity funds, traders said. December gold down $8.10, or 1.2 percent, at $727.10 an ounce on the COMEX division of the New York Mercantile Exchange at 10:46 am EDT (1446 GMT).
Futures traded in a $40 range. December dropped to a 14-month low of $695.20, the weakest since August 17, 2007. Funds are liquidating to raise cash, and chart-based weakness below $738 encouraged short selling, said floor trader. Investors took profits as prices dropped below $700 an ounce, fearing they could fail to lock in gains, said dealer.
Gold partially lifted by a better stock market, strength in oil and commodities, absence of a dollar rally. Index- and structured-product investors continue to disinvest from commodities, putting pressure on commodity prices - John Reade, UBS Commodity Strategy. COMEX estimated 10:00 am volume at 98,222 lots and options turnover at 15,743 lots. Spot gold at $726.95 an ounce, down slightly from Wednesday's close of $727.65.
December silver up 34.5 cents, or 3.7 percent, to $9.805 an ounce, after initially hitting a near-three-year low of $9.165 an ounce. COMEX estimated 10:00 am volume at 12,775 lots. Spot silver at $9.78, up 2.4 percent from Wednesday's finish of $9.50. NYMEX January platinum down $40.90, or 4.8 percent, to $816.30 an ounce.
Platinum group metals hurt by fears of weak buying from the auto sector for catalytic converters. Spot platinum at $796.50, down 4.2 percent from Wednesday's late quote of $831.50. December palladium drops $6.10, or 3.4 percent, at $174.00 an ounce. Spot palladium at $169.00, down 2.6 percent from Wednesday's close of $173.50.