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Gold continues to drop early june as dollar gains Original Source Link: (May no longer be active)
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METALS STOCKS
Gold near 7-week low as dollar gains
Buck's new standing is adding to pressure on metals
By Ciara Linnane, MarketWatch
Last Update: 4:09 PM ET Jun 7, 2006
NEW YORK (MarketWatch) -- Gold futures closed at a seven-week low Wednesday, as the dollar continued higher on expectations of a June rate increase and hopes for a break in the diplomatic impasse over Iran's nuclear program.
Gold for August delivery closed down $2.10 at $632.60 an ounce on the New York Mercantile Exchange, its lowest finish since April 24.
Other metals were mixed with silver up 4.5 cents at $11.89 an ounce, platinum off $4.40 at $1,231.50 an ounce and palladium down $7.10 at $338.75.
Copper overcame morning weakness to close up 9.5 cents at $3.584 a pound.
On Tuesday, the front-month gold contract closed down $14, continuing the selloff sparked by comments from Federal Reserve Chairman Ben Bernanke on rising inflationary pressure.
Bernanke's remarks were viewed as a signal of further rate rises, sending the dollar higher against its major rivals. The trend held Wednesday, with the dollar up 0.3% at 113.44 yen and the euro off 0.3% to $1.2791.
Peter Grandich, editor of the Grandich Letter, suggested that investors may want to seize recent weak metals prices as a buying opportunity.
"Most of my technical indicators have now returned to the bullish side or are at least no longer very bearish," Grandich said. "Reward now equals or surpasses risk, going forward $50 lower and up to $500 higher is worth risking being aggressively long again."
Kevin Kerr, editor of Global Resources Trader, a newsletter published by MarketWatch, said he also thinks the recent weakness will not last long.
"The residual effects of Mr. Bernanke's not-so-subtle hints are putting gold in a position to test lower levels even from here, but that may be very short-lived," Kerr said.
Both Tehran and Washington are responding positively, initially, to the West's offer of incentives if Iran halts uranium enrichment.
"Only time will tell if this is a real resolution or more smoke and mirrors," he said. "Gold needs some fresh fundamentals, and that could come in the form of terrorism or a lack of definitive action by the Fed."
On the supply side, gold inventories were unchanged at 7.79 million troy ounces as of late Tuesday, according to Nymex data.
Silver supplies were down 481,128 troy ounces at 107.1 million troy ounces. Copper supplies were unchanged at 9,071 short tons.
Indexes that track the mining sector closed lower. The Philadelphia Gold and Silver Index was down 2.6% at 132.38, the CBOE Gold Index fell 3.3% to 133.28 and the Amex Gold Bugs was down 2.9% at 309.07.
Ciara Linnane is markets editor for MarketWatch in New York.
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