U.S. gold futures bounce early, dollar falls vs euro

By @ibtimes on

U.S. gold futures bounced in quiet trade early on Monday, after a volatile week when the market sold off heavily on risk aversion, as investors looked for new impetus during the usually slower summer months.

Platinum futures also steadied after they plummeted 3 percent on speculative sales and after news that Nissan developed a catalyst for cars that halved the use of precious metal components to clean tail-pipe emissions.

At 10:26 a.m. EDT (1426 GMT), most-active gold for December delivery on the COMEX division of the New York Mercantile Exchange was up $2.40 at $674.70 an ounce, dealing in a narrow range between $671.80 and $675.20.

A precious metal dealer in New York said that bullion would look for trading cues from the currency market, as a steadily weakening dollar had sent gold to rally $40 before the tumultuous sell-off began on Thursday.

We had such a volatile last few weeks, it's going to be fairly quiet to start off the week at least, he said.

On Thursday, August gold briefly touched a low of $652.80, which marked the weakest level since July 6. The August contract had lost as much as $35 since it hit a two-month high of $688.40 on Tuesday.

The euro climbed against the dollar on Monday, while the yen rallied against most currencies in volatile trade as concerns about the U.S. mortgage market sparked investors to unwind risky bets such as carry trades funded by the Japanese currency.

U.S. oil futures were down about 60 cents in early trading but remained well above $76 a barrel.

PHYSICAL DEMAND LAGS

The Commodity Futures Trading Commission (CFTC) said in its most recent Commitment of Traders report that speculators in gold futures raised their net long, or bullish, positions sharply by 54 percent in the week to July 24 as prices hit 2-1/2-month highs, just before prices began to turn south.

John Reade, head of precious metals strategy at UBS in London, said in a client note that gold's gain was relatively small in that period considering the weight of the heavy buying.

The poor performance of gold during this wave of speculative excess is probably an indication of poor current gold market fundamentals -- relatively heavy central bank selling and seasonally weak physical demand, Reade said.

Saudi Arabia gold sales rose almost 17 percent in volume and 25 percent in value in the second quarter of 2007, a senior World Gold Council official said on Saturday.

Spot gold was quoted at $662.85/663.45 an ounce, compared with $661.40/662.20 late Friday. The London morning gold fix was $661.50.

In other metals, NYMEX October platinum eased $1.90 to $1,284.80 an ounce. Spot platinum fetched $1,268/1,272 an ounce.

September palladium edged up 25 cents to $363.95 an ounce. Spot palladium was quoted at $360/364 an ounce.

Angloplat, the world's biggest platinum producer, said interim profit jumped sharply but higher costs and a cut in forecast output due to labor and safety issues cast a shadow.

The firm, majority-owned by mining group Anglo American Plc, said full-year refined platinum production would come in at 2.6 million to 2.65 million ounces, down from a previous estimate of 2.8 million to 2.9 million ounces.

COMEX September silver was up 12.5 cents, or 1 percent, at $12.840 an ounce, trading between $12.685 and

$12.850.

Spot silver was quoted at $12.78/12.82 an ounce, compared with $12.68/12.73 late Thursday. London silver was fixed at $12.73.

(Additional reporting by Eric Onstad in Johannesburg)

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