Skip navigation
Newswire

COMEX gold slips back on Dow bounce from 2002 low

NEW YORK, June 24 (Reuters) - COMEX gold ended easier Monday, erasing safe-haven gains after the stock market found its footing and the dollar moved up from new multiyear lows.

Before bouncing, Blue chips hit their lowest since early November, during the aftermath of Sept 11. Investors diversified into hard assets like gold to protect wealth from the weak greenback, poor earnings, corporate accounting jitters and a questionable economic recovery.

August gold settled off 40 cents at $324.70 an ounce after trading $327.70-$324.30. It was the first loss in a week, coming at the end of the session as the overbought market failed to grind back to the June 4 contract high at $331.50.

Spot gold closed $323.55/4.05, off from $324.40/90 at Friday's close. London's afternoon bullion fix was $326.40.

The Dow Jones industrial average was up 32 points in early afternoon trade, having tumbled about 170 points toward the 9,000 level in the morning. Gold and silver mining shares, which led bullion prices higher this year, clung to modest gains.

"The dollar strengthened a little bit toward the close. I think it got a little ahead of itself and people are also looking at the XAU (index) and the general level of the stock market. When the stock market rebounded gold came off," said Donald Eckert, global bullion risk manager at JP Morgan Chase.

The euro was plowing toward 1:1 with the greenback, hitting its highest since February 2000 before backing off $0.9816 to $0.9733/35. As the dollar fell, European investors found they could buy more dollar-denominated precious metals for a fixed amount of local currency.

Last minute position adjustments were also a factor before the Federal Open Market Committee starts a two-day meeting Tuesday to discuss interest rates and the economy.

"They (FOMC) are not going to do anything, so the dollar should weaken, in which case gold should go higher," said a bullion dealer. "It's almost a one-to-one negative correlation."

Most Wall Street forecasters see the Fed holding off raising interest rates from their current 40-year lows until at least November. Some see no Fed hikes this year.

Low U.S. interest rates make gold, which has almost no yield, look better. Gold mining companies and speculators can no longer earn money borrowing gold, short selling it and placing the proceeds in U.S. deposits.

Gold's war premium was also reinforced after an Israeli helicopter missile strike killed six Palestinians in a car carrying Islamic militants, while troops encircled Palestinian leader Yasser Arafat in his West bank headquarters.

July silver rose 1.2 cents to $4.867 an ounce after trading from $4.86 to $4.92. Spot silver closed at $4.85/87, up from $4.84/86 late Friday. It fixed at $4.905.

NYMEX September palladium fell $4.50 to $323.50 an ounce, hitting a new contract low at $322. Spot palladium fetched $319.50/339.50, its lowest since Nov 16, 2001.

"It's finally succumbing to fundamentals. Some selling came in that seemed to be maybe some inventory disinvestment," said a refinery dealer. "The demand is not great enough to sustain the producer selling that's still out there."

July platinum was off 70 cents at $562 an ounce, still hovering under last week's contract high at $572. Spot platinum was at $558/568.