SAN FRANCISCO -- Gold futures lost more than $2 but
closed above a two-week low Wednesday as traders
took the market's temperature and gauged interest for
the yellow metal.
"Traders feel the market may have overextended itself
and with the oil prices remaining firm there is
apprehension that global economies may cool off, thus
reducing demand for gold," said John Person, president of National Futures Advisory Service.
Gold for December delivery closed down $2.10 at $442.20
an ounce on the New York Mercantile Exchange, matching
Friday's level. The contract traded down to $440.50,
its lowest intraday level since Aug. 10, after briefly
marking a high of $445.70 for the day.
"The dollar turned south, thanks to a surprisingly large
drop in durable goods orders in July, and gold curiously
turned down along with it," said Brien Lundin, editor
of Gold Newsletter. Weakness in the greenback usually
attracts buyers into the gold market.
But "investors are caught in a tug-of-war between
conflicting economic and technical indicators, with many responding reflexively to every new headline, while
others are stuck like the proverbial deer in the
headlights, looking for some trend," said Lundin.
For his part, Lundin said that the price action in
gold "has been extremely constructive, and argues
for higher prices heading into the fall." But on a
short-term basis, "weak longs are being flushed out ...
by gold's failure to build upon its recent rally," he said.
From a technical standpoint, "fears that the funds are
too long and the commercials aggressively short have
made the Comex very vulnerable to a selloff," said Peter Grandich, editor of the Grandich Letter.
"While a good argument has been made by GATA (Gold
Anti-Trust Action Committee) that such a case doesn't
warrant such fears, the market has become conditioned
to such a result," he said.
"Very strong physical buying and the fact we'll soon
enter the strongest seasonal period for gold should keep
any retreat orderly," he added.
Compared to silver, platinum, and palladium, gold has the "greatest potential ... to head lower due to
liquidation of very large Comex long positions,"
said John Reade, an analyst at UBS, in a note to
clients.
Still, "positive news flow -- declining production, a
temporary halt to European central bank gold sales, and
soon-to-resume Indian physical demand -- may be keeping the longs on board," he said.
Elsewhere in the metals market Wednesday, September silver closed at a seven-week low of $6.922 an ounce, down 4.6
cents. October platinum rose $1.80 to end at $899.90 an
ounce, while September palladium finished at $184.50
an ounce, down $1.25.
September copper closed at $1.667 a pound, down 2.5 cents,
after
scoring gains over the past two sessions.
Tracking inventories, copper supplies were up 197 short
tons at 8,776 short tons as of late Tuesday, according
to Nymex. Silver stocks were flat at 111.0 million troy
ounces, while gold inventories stood at 5.95 million troy ounces, up 49,442 troy ounces from the previous session.
In equities, metals-mining shares closed lower, paced by
a 2.5% fall in the Amex Gold Bugs Index (HUI), which
ended the session at 200.16. Hecla Mining was among the
biggest losers in the index, down 5.2% at $3.53.
The CBOE Gold Index (GOX) closed at 84.04, down 2.3%,
while the Philadelphia Gold/Silver Index (XAU) shed 2.1%
to end the day at 93.61.
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