NY gold sags in thin early trade, silver taps new low


NEW YORK, Aug 22 (Reuters) - COMEX gold was down early Thursday, and silver hit a new six-month low, under pressure as investors looked to rotate into an improving stock market even as summer thinness tested conviction on direction.

Dealers said trading this week has been very thin and choppy with many players away on vacation. Adjustments before a UK market holiday on Monday exacerbated the choppiness, they said.

December gold at 0921 EDT was off $1.90 at $307.40 an ounce, trading $310.10-$306.10, a whisker from the $306.00 low plumbed in Monday's shakeout.

"It's just some follow-through selling from yesterday. There were light stops in silver and light stops in gold under yesterday's lows," said a COMEX broker.

The broker said gold was one of the few markets where investors felt flush enough to remove cash for redeployment to Wall Street, amid hopes that equities carved out a bottom this summer, when their decline to five-year lows was still supporting gold near 2-1/2 year highs.

"Some people are taking it out of here with profits they had in gold and putting it back in the stock market. Money seems to be shifting," he said.

The Dow Jones industrials opened up 10 points Thursday after an 85-point rally on Wednesday failed to take out the psychological 9,000 threshold.

Spot gold was at $305.70/6.20, off from the close at $307.70/8.20 and Thursday's first fix in London at $306.45.

A steadier dollar against the euro and yen also made it more expensive for overseas investors to buy bullion.

"The dollar is pretty strong and gold is going down. Three Fed governors all came out the same day and said there are not going to be any more rate cuts, so I guess the dollar can stay strong," said a bullion dealer.

The dealer was referring to remarks by the heads of the Federal Reserve Banks of San Francisco, Philadelphia and Chicago on Wednesday that the current low level of borrowing costs should foster continued economic expansion, albeit a halting one.

The seemingly coordinated comments squashed speculation in the bond market that the Fed would cut rates this year to keep the struggling economy from dipping back into recession.

The Fed's 11 cuts last year brought rates to 40-year lows. Low dollar deposit rates were a major impetus for gold's run above $330 in June, by raising the cost of carry of forward gold sales for mining companies and speculators.

But physical demand from top-gold-consuming-nation India as its festival season gets going has reportedly put a floor in spot gold at $304/305.

September silver was off 2.0 cents at $4.40 an ounce, taking out Monday's low trading from $4.44-$4.38. That was its lowest since Feb 7. Spot silver was quoted $4.39/41, off from $4.42/44 late Wednesday and Thursday's $4.42 fix.

NYMEX October platinum was trying to snap a five-day retreat, standing $3.50 firmer at $546 an ounce. Spot platinum was at $542.50/550.50.

September palladium was up $1 at $320 an ounce. Spot last fetched $316.40/328.40.



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