NEW YORK, July 22 (Reuters) - COMEX gold futures turned sharply lower on Tuesday following gains in U.S. dollar and stocks on news that Saddam Hussein's two sons were killed in a shoot-out with U.S. soldiers in Iraq, traders said.
The gold market closely watched the other markets, which took off in late morning on first reports of the deaths. Later, gold bullion edged lower when the U.S. military confirmed the deaths of Saddam's sons, Qusay and Uday, in a fierce gun battle in northern Iraq.
"Gold was following the euro all day, very closely. If the euro turned up, gold turned up. If the euro moved down, gold turned down too. There seemed to be some players who were following the euro to trade gold," said one gold broker.
August futures on the New York Mercantile Exchange's COMEX division finished $0.30 lower at $350.70 an ounce, after earlier hitting its highest level since July 2, then swiftly tumbling to the day's lows soon after news of Saddam's sons.
Monday's range ran between $346.60 to $353.00 an ounce.
Final gold volume was estimated by COMEX at 48,000 lots on Tuesday, after a total tally of 46,882 on Monday. Open interest as of Monday had risen to 188,123 lots.
Spot gold slipped to $350.50/1.00 an ounce from $350.90/1.40 in late Monday dealings. London dealers fixed the spot reference price at $352.00 an ounce.
The euro came well off its earlier highs to trade at $1.1318/22 on Tuesday afternoon, but earlier had reached its highest level since July 11 at $1.372. A weaker euro diminishes dollar-denominated gold in key markets like Europe and Asia.
In addition, U.S. equities turned higher on Tuesday, underpinned by solid earnings reports from the technology sector and propelled higher on the news of Saddam's sons.
Stock gains suggest improved economic prospects and undermine golds attraction as a safe-haven investment.
Analysts also said any sign of progress by U.S. forces could improve consumer sentiment as well as investment in the United States, and could ease the strain on the U.S. budget from the cost of supporting military forces in Iraq.
A smoother geopolitical situation lowers the demand for safe-haven investments such as gold.
Looking at the technical side of COMEX August gold one chartist said the break of $351 an ounce should lead to lead to $349, then $347.00 an ounce on the August gold contract.
Resistance stood above a weekly high at $353.80 an ounce, then $355.20, and levels above $357.00.
COMEX September silver added 4.0 cents to settle at $4.79 an ounce, and traded from $4.745-$4.805.
Spot silver was up at $4.75/77 from a late Monday quote at $4.74/4.75 in New York. Silver was fixed at $4.7525.
October platinum futures gained $2.90 to end at $687.90 an ounce. Spot platinum held at $685.00/690.00.
September palladium lost $2.00 to close at $165.95 an ounce. Spot was quoted at $164.00/169.00.