Philip IV''s money is still good at the bar and everywhere else

Section:

By Myra P. Saefong
CBSMarketWatch.com
Wednesday, August 24, 2005

http://www.marketwatch.com/news/story.asp?guid=%7B9ACBC3B0%2D6B19%
2D430D%2DB46B%2D54D175EF6478%7D&siteid=mkwt

SAN FRANCISCO -- Gold futures lost more than $2 but closed above a
two-week low Wednesday as traders took the market's temperature and
gauged interest for the yellow metal.

"Traders feel the market may have overextended itself and with the
oil prices remaining firm there is apprehension that global
economies may cool off, thus reducing demand for gold," said John
Person, president of National Futures Advisory Service.

Gold for December delivery closed down $2.10 at $442.20 an ounce on
the New York Mercantile Exchange, matching Friday's level. The
contract traded down to $440.50, its lowest intraday level since
Aug. 10, after briefly marking a high of $445.70 for the day.

"The dollar turned south, thanks to a surprisingly large drop in
durable goods orders in July, and gold curiously turned down along
with it," said Brien Lundin, editor of Gold Newsletter. Weakness in
the greenback usually attracts buyers into the gold market.

But "investors are caught in a tug-of-war between conflicting
economic and technical indicators, with many responding reflexively
to every new headline, while others are stuck like the proverbial
deer in the headlights, looking for some trend," said Lundin.

For his part, Lundin said that the price action in gold "has been
extremely constructive, and argues for higher prices heading into
the fall." But on a short-term basis, "weak longs are being flushed
out ... by gold's failure to build upon its recent rally," he said.

From a technical standpoint, "fears that the funds are too long and
the commercials aggressively short have made the Comex very
vulnerable to a selloff," said Peter Grandich, editor of the
Grandich Letter.

"While a good argument has been made by GATA (Gold Anti-Trust Action
Committee) that such a case doesn't warrant such fears, the market
has become conditioned to such a result," he said.

"Very strong physical buying and the fact we'll soon enter the
strongest seasonal period for gold should keep any retreat orderly,"
he added.

Compared to silver, platinum, and palladium, gold has the "greatest
potential ... to head lower due to liquidation of very large Comex
long positions," said John Reade, an analyst at UBS, in a note to
clients.

Still, "positive news flow -- declining production, a temporary halt
to European central bank gold sales, and soon-to-resume Indian
physical demand -- may be keeping the longs on board," he said.

Elsewhere in the metals market Wednesday, September silver closed at
a seven-week low of $6.922 an ounce, down 4.6 cents. October
platinum rose $1.80 to end at $899.90 an ounce, while September
palladium finished at $184.50 an ounce, down $1.25.

September copper closed at $1.667 a pound, down 2.5 cents, after
scoring gains over the past two sessions.

Tracking inventories, copper supplies were up 197 short tons at
8,776 short tons as of late Tuesday, according to Nymex. Silver
stocks were flat at 111.0 million troy ounces, while gold
inventories stood at 5.95 million troy ounces, up 49,442 troy ounces
from the previous session.

In equities, metals-mining shares closed lower, paced by a 2.5% fall
in the Amex Gold Bugs Index (HUI), which ended the session at
200.16. Hecla Mining was among the biggest losers in the index, down
5.2% at $3.53.

The CBOE Gold Index (GOX) closed at 84.04, down 2.3%, while the
Philadelphia Gold/Silver Index (XAU) shed 2.1% to end the day at
93.61.

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----------------------------------------------------

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