NEW YORK, Oct 24 (Reuters) - COMEX gold fell to a two-month low then recovered some ground Thursday, with fund managers showing little conviction as the stock market seesawed between gains and losses.
In other precious metals, thinly traded palladium fell to a contract low amid falling demand from automobile makers, the main buyers of the metal for use in anti-smog devices.
Taking a cue from a firm opening on Wall Street and a stronger dollar, commodity funds and trade houses initially sold the active December gold contract down to $309.10 an ounce, the lowest since August 26.
December gold ended down $1.40 at $311.20, topping at $313 in a midmorning recovery. Estimated turnover was a brisk 43,000 contracts.
Stop-loss selling to unwind stale bullish positions was unleased below $310.10, last week's low and the key 200-day moving average technical indicator.
"They got the stops down there, then because everybody's been sitting there short waiting for it to go down, the first ones started to cover their shorts and take profits," said a trader at a precious metals refinery. "That was certainly to accommodate the Dow turning down into the negative."
Spot gold was quoted at $309.80/0.30, down from Wednesday's close at $312.00/50. London dealers fixed the morning spot reference price at $311.10.
Follow-through on the downside for gold was also curbed midmorning buy news that Canada's Barrick Gold Corp, the world's second largest gold miner, was on track to reduce its hedge book of forward sales to 12 million ounces by the end of 2003, from 16.9 million ounces at the end of September 2002.
After several ebbs and flows, the Dow was 152 points in late afternoon trade. The index of 30 blue chips is still up more than 1,100 points since setting five-year lows two weeks ago.
But after buying gold for risk insurance all year, few funds have been willing to sell it short.
Financial market volatility is high with uncertainty about earnings, the economy and U.S. brinksmanship over disarming Iraq throwing sand on Wall Street's burgeoning bullish mood.
The euro also erased losses after morning weakness made dollar-priced gold more expensive to European investors and fabricators in local terms.
Taking a cues from gold, December silver fell 4.5 cents to $4.362 in a $4.41-$4.335 range. Volume was a light 7,000 lots.
Spot silver closed at $4.36/38, down from $4.40/42 late Wednesday. Silver fixed at $4.39.
NYMEX January platinum rose $5.40 to $580.20 on light turnover of 238 contracts. Spot platinum was quoted $583/588.
December palladium set a contract low, ending down $5.50 at $310.50 an ounce on volume of just 173 lots. Spot palladium closed at $305/315.
"It's just a little bit of selling from our friends in the trade, still liquidating inventories," said Leonard Kaplan, president of Prospector Asset Management. "It does look like car sales are going to be dropping here."
Car makers have been substituting other other platinum group metals for palladium to use in catalytic converters, because supplies of palladium have been so erratic in recent years.