U.S. gold, silver fall early despite weak dollar
NEW YORK (Reuters) - Selling by funds and a lack of buying interest drove U.S. gold and silver futures sharply lower early on Tuesday despite a weaker dollar, and traders said prices could fall further if support levels on technical charts were breached.
At 9:55 a.m. EDT (1355 GMT), most-active gold for June delivery on the COMEX division of the New York Mercantile Exchange was down $6.90, or 1 percent, at $676.60 an ounce, trading in a tight from $675.40 to $682.30.
Leonard Kaplan, president at Prospector Asset Management, said that investors were frustrated with holding long positions in gold because prices failed to move higher.
"You're certainly seeing fund selling. And people are getting disappointed with the performance of gold. That's why you are seeing the selling," Kaplan said.
"Theoretically, gold should have been doing much better. You have the euro all-time highs. You have the oil strong. And gold just didn't perform as well," he said.
Kaplan said that the key support level was around $673, which was the recent low, and that prices could fall further it that level was broken.
By morning, the dollar was trading near its session lows against the euro. A lower greenback makes dollar-denominated assets like gold cheaper for investors holding other currencies.
U.S. oil futures fell slightly but held above $65 a barrel as they still drew support from high gasoline prices and the news that top exporter said it disrupted plans for suicide operations against its oil facilities last Friday.
Gold is generally seen as a gauge against oil-led inflation.
James Moore, analyst at TheBullionDesk.com, said in a note that gold opened in a slow mood Monday because Japanese traders were absent for a public holiday.
All Japanese financial markets are closed on Monday, and will be closed again on Thursday and Friday for the "Golden Week" holidays. In addition, trading in China's markets is expected to be slow during a week-long May day holiday period.
"The dollar is likely to be the key driver for gold in the coming sessions with a break through $1.37 against the euro potentially propelling gold back toward the $694 resistance line," he said.
Moore said, however, there was the risk that further failed rallies would trigger another correction, potentially leading to a test of technical-chart support at around $664 to $669 an ounce.
Spot gold was quoted at $673.10/3.60 an ounce, sharply lower than a late quote of $679.20/9.70 in New York on Monday. London's morning gold fix was $677.50.
In other precious metals, COMEX July silver SIN7 was down 28.50 cents, or 2.1 percent, to $13.295 an ounce, trading from $13.205 to $13.585.
Spot silver was quoted at $13.17/3.21, compared with $13.43/3.48 late Monday. Silver was fixed at $13.450 in London.
July platinum fell $3.40 to $1,295.00 an ounce. Spot platinum XPT= was quoted at $1,283.00/1,288.00.
June palladium was down $2.95 to $371.05 an ounce. Spot palladium fetched $366.00/370.00.
