NEW YORK, July 21 (Reuters) - COMEX gold futures settled at a two-week low under $400 an ounce on Wednesday, after the dollar rose broadly on optimistic comments about the U.S. economy by Federal Reserve Chairman Alan Greenspan, dealers said.
Silver prices staggered lower, in line with gold, and platinum and palladium also fell.
August gold on the New York Mercantile Exchanges COMEX division slumped to $397.30 an ounce, off $4.80 on the day, after trading from $402.40 to $395, and touching its lowest level since July 7. Final estimated gold turnover was a busy 70,000 contracts.
Gold lost its grasp on psychological support at $400 as the dollar surged on Greenspans comments in his second day of testimony to Congress, saying an above-trend pace of growth is sustainable this year and next. His outlook reinforced expectations of further interest rate increases, analysts said.
Traders have been scrutinizing the Fed Chairmans commentary on monetary policy as any aggressive rate hikes would tend to raise demand for the dollar and pressure gold.
"We were certainly responding to the dollar strength," said James Pogoda, vice president of precious metals at Mitsubishi International Corp. "Golds very closely fading the dollar moves and tracking the euro."
A higher dollar typically crimps demand for gold, which is dollar-denominated, as it becomes costlier for non-U.S. buyers.
At mid-afternoon, the euro was trading at $1.2229, after earlier slipping to a two-week low around $1.2212.
Further compounding the euros losses initially was news in the morning that Iraqi security reportedly found missiles carrying nuclear warheads, said traders. The U.S. military said it had no information on the report by United Press International.
Eventually, the dollar coughed up some of its gains after the report was dismissed as "stupid" by Iraqs Interior Ministry.
Greg Weldon, editor of Metal-Monitor.com, said bullion appeared stuck mid-way in a 6-month old, $60 range between $372 and $432, seemingly with "no dominant trend to follow."
"Frustration begs patience as the market gyrates, seemingly aimlessly digesting last years huge rally," he wrote in a gold report.
Dealers pinpoint support in COMEX August gold futures at $392.40 an ounce, with resistance at $402-$402.50, $405 and $406.
Spot gold slid to $396.70/7.20, down from the last New York close around $401.00/1.75. Wednesdays afternoon fix in London was at $398.50.
COMEX September silver tumbled 20.2 cents to $6.41 an ounce, in a range of $6.615 to $6.34, its weakest since July 13. Spot silver hit $6.38/41, versus Tuesdays close in New York at $6.57/60. Wednesdays London fix was at $6.47.
NYMEX October platinum ended $7.90 lower at $825.40 an ounce. Spot platinum traded at $825.50/830.50 an ounce.
September palladium lost $5.70 to $226.15 an ounce. Spot palladium was at $225.00/230.00 an ounce.