Gold News & Info

Source: Reuters

New York— U.S. gold futures finished with the lowest close in two months on Thursday after a rally in the dollar sparked heavy fund liquidation across the metals complex, traders and analysts said.

Recent investment bank reports that the commodity cycle might be starting to run its course also may have fed the profit-taking in gold.

"The funds have been very long most asset classes and they likely were doing some rebalancing," said Bernard Hunter, director of precious metals marketing at ScotiaMocatta in Toronto.

"The dollar was the trigger in the morning, but bear in mind you've also had the oil and the base metals under pressure in the last couple of days," which probably was a sell signal for some gold traders, he added.

June delivery gold on the New York Mercantile Exchange's COMEX division fell $5.40 to end at $425.60 an ounce, its weakest close since Feb. 11, after trading from $431.30 to $423.50.

The Reuters CRB index of 17 commodity futures drifted below 300 to a seven-week low Thursday, largely due to dollar-related selling. It was at 299.36 after New York gold settled.

"Fund selling and the dollar are the two main stories," said Scott Meyers at Pioneer Futures.

The dollar rose on bets that U.S. interest rates will keep rising, widening the differential with rates in other major economies, currency dealers said. That should prop up the greenback and pressure gold as a result.

Also, rumors of a big investor buying the greenback might have helped lift the dollar. Billionaire investor Warren Buffett wagered $21.4 billion against the dollar last year. Since Wednesday, New York traders have said rumors were swirling that Buffett may be reducing his short-dollar position.

A rising dollar usually hurts dollar-denominated gold as it gets costlier for non-U.S. buyers.

Bullion should consolidate between $420 and $425 following the sell-off, Hunter said, though it could test lower in the event the euro/dollar drops below key support at $1.2750.

Spot gold slid to $423.65/4.40 an ounce, below Wednesday's New York close at $429.00/9.80. Thursday's afternoon fix in London was $423.45.

The euro slipped below $1.2800 to two-month lows around $1.2768.

International Monetary Fund leader Rodrigo Rato said Thursday that if IMF shareholders decide to use gold reserves to finance debt relief for Third World countries, selling it is better than revaluing the bullion on its balance sheet.

But great care should be taken not to disturb bullion markets, Rato said, suggesting the IMF join the voluntary central bank agreement, under which they say in advance how much gold they will sell and over what period of time.

The decision to sell gold rests with the IMF's board of directors and they have yet to decide.

The IMF is the world's third-biggest holder of gold with 103.4 million ounces, but market players are thinking there will be no sales due to influential U.S. opposition.

Markets are awaiting U.S. net capital flows figures on Friday for the effect on currencies. The forecast is for $65.0 billion in February.

May silver settled down 16.5 cents at $7.06 an ounce, after moving from $7.23 to $7.01. Spot silver priced at $7.01/04, against $7.19/22 late Wednesday. It fixed at $7.105.

July platinum (shed $5.70 to end at $861.90 an ounce. Spot platinum saw a muted fall to $860/864.

Thinly traded June palladium rose $1.50 to $198.50 an ounce. Spot palladium was quoted at $196/199.