Wednesday, August 15, 2007


Fed helps

- U.S. gold futures finished essentially flat on Wednesday, shaking off initial losses amid safe-haven buying, and after the Federal Reserve's added temporary reserves to the banking system to boost liquidity.

Palladium fell after posting steep losses in the last several sessions, weighed down by chart-based commission house sales and long liquidation amid light volume, a floor trader said.

Most-active gold for December delivery on the COMEX division of the New York Mercantile Exchange settled unchanged at Tuesday's close of $679.70 an ounce, trading between $672.50 and $681.20.

Frank McGhee, head precious metals trader of Integrated Brokerage Services in Chicago, said that gold's movement on Wednesday was a logical result of the actions of the Fed and European Central Bank (ECB).

McGhee said that gold futures hit a low in early sessions as the dollar rallied versus the euro after the ECB's several cash infusions to the banking system since last Thursday.

But, he said that the selling pressure came off gold after the Fed said that it added $7 billion of temporary reserves to the financial system.

Traders and analysts said that the precious metals complex had held up pretty well considering steep losses in the stock markets because of liquidity fears.

"Gold has been an oasis of calm compared to the deep losses seen across other asset markets over the past month," John Reade, head of precious metals strategy at UBS in London, said in a client note.

Reade said he believed that the longer the current credit squeeze went on, the more likely that gold would attract safe-haven buying. He also noted small additions to the gold exchange-traded fund (ETF).

Data showed that gold held by StreetTRACKS Gold Shares , the world's largest bullion ETF by far, rose to a record high of 510.21 tonnes as of Tuesday.

Trading volume was light on Wednesday. COMEX estimated final volume at 78,803 contracts, and gold options at 9,485 lots. Turnover at Chicago Board of Trade's electronic 100-oz gold futures was 21,396 lots at 2:31 p.m. EDT (1831 GMT)


U.S. stocks and the blue-chip Dow Jones industrial average index were lower in afternoon trading, after the benchmark index posted consecutive losses in the last four sessions.

Jonathan Jossen, an independent trader, said from the COMEX floor said that a large number of gold futures call options were bought in the last few sessions, despite the fact that bullion prices had dropped over the same period.

Meanwhile, the Consumer Price Index, a key inflation gauge, rose just 0.1 percent last month as gasoline prices fell 1.7 percent, the Labor Department said. Economists polled by Reuters had expected a rise of 0.2 percent.

Global gold demand in the second quarter jumped 19 percent year-on-year to 922 tonnes as less volatile prices spurred jewelry buying in India and around the world, industry-sponsored World Gold Council (WGC) said Wednesday. [ID:nN14435875]

At 2:45 p.m., spot gold was quoted at $668.80/669.40 an ounce, compared with $668.30/668.90 late Tuesday. The London afternoon gold fix was $667.25.

COMEX September silver closed down 19.3 cents, 1.5 percent, at $12.555 an ounce, dealing between $12.335 and $12.765.

Spot silver was quoted at $12.54/12.59 an ounce compared with $12.69/12.72 late Tuesday. London silver was fixed at $12.510.

Meanwhile, palladium futures have dropped nearly 6 percent from a session-high of $365.50 last Wednesday.

September palladium finished down $4.20 or 1.2 percent at $350.50 an ounce. Spot palladium was quoted at $345.50/349.50 an ounce.

Ralph D'Esposito at RJ Futures said from the NYMEX floor that palladium fell because of light liquidation and selling by commission houses after sell-stops were triggered. He said volume was not heavy.

NYMEX October platinum fell $5.50 to end at $1,271.50 an ounce. Spot platinum fetched $1,261/1,268 an ounce.

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