Posted 19 May 2006 - 01:25 PM
Gold falls as dollar rises
Price of precious metal off the 26-year high scaled last week, but dealers see more upside.
May 19, 2006: 11:05 AM EDT
NEW YORK (Reuters) - U.S. precious metals futures fell further Friday morning as a stronger U.S. dollar sparked speculative liquidation in the volatile hard assets, dealers said.
In early trade gold for June delivery was down $27.40, or 4 percent, at $653.50 an ounce on the New York Mercantile Exchange's COMEX division, trading from $688.90 to $651 which marked its cheapest since late April.
NYMEX June palladium shed $39.50 or 10 percent to $333 an ounce, hitting a six-week low of $330.
In earlier London action, gold prices fell as they tracked trends in the dollar, but the buyers that took the market to recent 26-year highs should soon return, dealers said.
"We might get people encouraged to buy back at these levels and drive it higher again," said Robin Bhar, analyst at UBS Investment Bank.
"We do expect more volatility... but today seems to be a day of consolidation."
Spot gold rose as high as $688.50 an ounce in Asian trade before falling to $661.20 an ounce, down from $680.70 in late New York trade and off last week's 26-year high of $730.
Bullion dealers were braced for choppy trade.
"Take out a coin and toss. Whatever it says just follow it... I will stick to my trading range of $670 to $730 for the moment until proven otherwise," said a bullion dealer in Singapore.
The dollar vaulted higher against the euro and the yen as investors felt the U.S. currency's slide in the past month might have gone far enough and squared positions before the weekend.
But sentiment on the dollar remained weak after U.S. Treasury Secretary John Snow reiterated his dissatisfaction on the pace of China's efforts to lift the flexibility of the yuan.
Dollar losses often boost gold prices by making bullion cheaper for holders of other currencies.
Positive trend
James Moore, precious metals analyst at TheBullionDesk.com, said gold remained comfortably bullish in the long term given the Iran nuclear issue, high oil prices and generally bearish dollar sentiment.
All that looked set to push bullion towards $850 later in the year, he added.
The upbeat mood has attracted new investors and prompted some companies to launch new products.
Standard & Poor's, the world's leading index provider, and TSX Group announced plans this week to create a real-time global gold index. Based in Canada, the index will track key gold mining companies around the globe.
"We view the selloff of recent days as the start of a correction in a bull market that has further yet to run. Some of the weaker longs have been cleaned out, with only modest damage to the gold price," said Commonwealth Bank of Australia.
Platinum rose as much as 1.4 percent on fund buying, but the metal remained below this week's record high of $1,336 an ounce.
Spot platinum rose as high as $1,318 an ounce before falling to $1,310, compared with $1,304 in New York.
Johnson Matthey, the world's top platinum distributor, said Monday demand for the metal was set to outpace supply for the eighth year in a row in 2006.
Palladium rose to $364.50 an ounce from $358.50, while silver was at $12.63 an ounce from $12.61.
