June 30, 2009 / 6:17 AM / 10 years ago

Gold falls toward $920 on dollar rise, weak commods

NEW YORK (Reuters) - Gold futures tumbled below $930 an ounce on Tuesday as a stronger dollar prompted broad-based selling across the commodities sector, and better macroeconomic sentiment could further decrease safe-haven buying in the metal.

Bullion ended the second quarter less than $10 above its first-quarter close, as signs of global economic stability offset demand for gold as a hedge against long-term inflation.

Zachary Oxman, managing director with California-based TrendMax Futures, said investors took profits on the last day of the quarter following a period of solid gains across the commodities group.

“What you are going to see is a sell-off in commodities, and gold is going to be dragged down by it. It’s nothing fundamental about the gold market itself,” Oxman said.

U.S. August futures settled down $13.30, or 1.4 percent, at $927.40 an ounce on the COMEX division of the New York Mercantile Exchange.

Spot gold traded at $926.50 at 2:16 p.m. EDT, down from its previous close of $937.05. Bullion’s intra-day low of $922.60 was the lowest since June 24. Gold closed at $917.15 on March 31.

The precious metal reversed gains when the dollar .DXY, which has been under pressure, gained after an unexpected drop in U.S. consumer confidence data.

“Obviously, in these days where everything is linked together, from crude prices to the price of gold, any change to people’s view of the economy and inflation expectations will cause a reaction,” said Ole Hansen, an analyst at Standard Bank.

Investors view gold as an insurance against the falling value of their dollar-denominated portfolio.

The Reuters/Jefferies CRB .CRB index of commodities prices dropped nearly 2 percent, led by a sharp decline in crude oil futures.

INFLATION IN FOCUS?

Matthew Turner, an analyst at VM Group, said gold investors seemed to be focusing more intently on long-term inflation expectations than recession fears, which would strengthen the link between crude and bullion prices.

“But there are no immediate signs of inflation anywhere for now, so investors are looking to the long term, and of course when inflation does start to go up, the price of gold will be rising well ahead of it,” he said.

In official gold sector news, the Royal Canadian Mint is missing about C$18.8 million ($16.2 million) worth of gold and has not ruled out theft even as it continues to try to solve the mystery, according to an official on Tuesday.

An independent review of the Mint’s records found a discrepancy of 17,500 troy ounces of gold.

In other precious metals, spot silver was lower at $13.55 against $13.84 on Monday, platinum fell to $1,172.00 from $1,182.00 previously, and palladium was at $246 against its previous finish at $247.00.

Additional reporting by Nick Vinocur, Humeyra Pamuk and Pratima Desai; editing by Jim Marshall

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