GATA''s international conference supports Mexican silver coinage plan

Section:

By Myra P. Saefong
CBSMarketWatch.com
Thursday, August 18, 2005

http://www.marketwatch.com/news/story.asp?guid=%7B72DA2173-9C34-495D-
A384-CBF20F4A0328%7D&siteid=mkwt

SAN FRANCISCO -- Gold futures closed modestly lower Thursday as
strength in the U.S. dollar squashed traders' attempts to recover
part of the more than $6-an-ounce drop prices suffered in the
previous session.

December gold fell 50 cents to close at $444.70 an ounce on the New
York Mercantile Exchange. But the contract traded as high as $447.70
earlier after dropping more than $6 in Wednesday's session.

Silver for September delivery closed up 0.5 cent at $6.998 an ounce.

"As far as today's trading goes, gold's early rebound is an
indication that the bull market trend is intact, and that the
contribution of higher energy prices to the metal's rally was
marginal, at best," said Brien Lundin, editor of Gold Newsletter.

The "speculative froth in oil and copper was adding some near-term
risk to the gold market," and that was proven true on Wednesday, he
said.

But now, "the underlying support for gold has been outside of the
speculative arena, with physical demand emanating from buyers with
longer-term views," he said.

"Oil money from the Middle East as well as seasonal demand from
India are certainly strong contributors to the recent surge in gold
buying," said Lundin.

Even more demand stems from investors who are looking six months to
a year down the road and "seeing a slowing U.S. economy and the end
of the Fed's rate-hike campaign," he said.

In that scenario, the investors "don't see gold trading for anywhere
near today's prices," he said.

In the meantime, disappointing European economic data and demand for
U.S. Treasurys spelled strength in the dollar against the euro on
Thursday.

And strength in the dollar usually eases investment demand for gold.

Earlier Thursday, the dollar and interest rates played a "tug of war
(i.e. lower rates but a higher dollar) with lower equities," said
Charles Nedoss, an analyst at Peak Trading Group, noting that the
lower equities and lower rates implicate a lower dollar to come.

Also with equities struggling, the market sees "some money moving to
bonds which put pressure on rates -- this can be bearish the dollar
down the road," he said.

Dale Doelling, chief market technician at Trends In Commodities,
also expects weakness in the dollar.

"Trend in the dollar is still down and the market is just testing
the resolve of the dollar bears at this time," said Doelling. Given
that, "the long-term trend remains positive for the precious metals
and traders will eventually see that [Wednesday's gold-price drop]
was nothing more than a tremendous buying opportunity," he said.

Some traders on Wednesday "suggested the rise in the dollar was
making it clear that gold wasn't the best instrument to capitalize
on the potential for flight to quality conditions," said Nell
Sloane, an analyst at NSFutures.com in daily commentary.

And with oil falling back sharply off new highs, there were a number
of reasons for traders to reduce flight to quality holdings of gold
on Wednesday, she said.

There was minor support overnight at $443.40, "but there is little
preventing the market from sliding lower over the coming sessions,"
she warned.

For now, "the gold market has lost its bullish buzz" and about the
only positive about the recent price setback "is that lower gold
prices might help improve Indian demand ahead of the coming festival
season," she said.

Indeed, for the moment, "gold continues to find good demand from the
physical sector which will no doubt increase as we head into the
festival season in India and the Middle East," James Moore, an
analyst at London-based TheBullionDesk.com, wrote in a note to
clients.

Elsewhere in the metals market Thursday, copper prices climbed,
recovering a tiny part of the more than 3% they lost in the previous
session.

September copper closed at $1.659 a pound, up 0.2 cent, or 0.1%.
Prior to Wednesday's price drop, the contract had marked five-
straight winning sessions.

Taking a look at the bigger picture, however, "with the dollar
climbing again and with the equity markets also under pressure,
funds may be more interested in taking profits off the table rather
than taking on more exposure," said William Adams, an analyst at
BaseMetals.com.

Rounding out the Nymex action, October platinum rose $3.50 to close
at $893 an ounce while September palladium closed at $183.85 an
ounce, down $1.30.

Tracking inventories, copper supplies were up 108 short tons at
8,112 short tons as of late Wednesday, according to Nymex. Silver
stocks were unchanged at 111.2 million troy ounces, while gold
inventories stood at 5.90 million troy ounces, down 1,608 troy
ounces from the previous session.

In equities, metals-mining shares closed mainly lower following
weakness on Wednesday.

Tracking the sector as a whole, the CBOE Gold Index closed at 86.29,
down 0.3%, with a 1.1% fall in shares of Placer Dome leading the
decline.

The Philadelphia Gold/Silver Index declined by 0.2% to close at
95.84 points, and the Amex Gold Bugs Index ended the session at
208.19, down 0.4%.

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