960410

Comex gold,

erases previous

gains

NEW YORK: Comex gold settled sharply lower as a speculative play that Monday lifted the active futures above $400 an ounce quickly unraveled, traders said.

They noted that a player who bought heavily near the close Thursday and Monday unloaded a large volume of those positions today, in apparent disappointment that Monday's rally failed to attract follow-through buying.

Active June gold ended $3.60 lower at $397.10 an ounce, traded from $400.40, a high hit early, and $396.20. Volume was estimated at 39,000 lots, up slightly from Monday's 35,496.

Dealers quoted bullion at $394.30/60.

Tuesday losses left June futures perilously close to key support levels, including $395.70, which held during repeated tests of the downside last week, and $395.00, a level last touched in early March. A dip below that would take the June contract to its lowest level since Jan 2.

A tumble Monday in stock prices and a rally in the KR-CRB index of commodity futures helped stoke bullish sentiment in gold, but this morning stocks showed signs of steadying while the KR-CRB index pulled back from its highs.

Continued weakness in the rand, which hit a new all-time low against the dollar, was also cited by some traders as negative for gold, although others said it had little effect.

Gold's pullback from $400 today and the subsequent speculative bailout left traders wary about the next move.

"The way the markets are trading now, you're not getting follow through either way," said LFG analyst Tony Raia.

He also lamented the apparently short-term speculative play that rocked the market in the past few days. "It kills liquidity and keeps people out of the market," he said.

Looking ahead, traders said they would be eyeing U.S. price data due Thursday and Friday for any signs that the recent climb in commodity prices was making its way into wholesale and retail prices.

SILVER

Comex silver settled with steep losses, as the precious metals relinquished the gains from Monday's rally amid disappointment at this morning's lack of follow-through buying, traders said.

Monday's tumble in the stock market and a surge in grain and petroleum prices were termed supportive for the precious metals yesterday, although a key element in the rally was late speculative buying in gold that was unwound today.

May silver settled 9.8 cents lower at $5.467 an ounce, near the bottom of the day's $5.555 to $5.46 range. Volume was moderate at an estimated 18,000 lots versus Monday's 19,243.

One floor source noted that sell-stops were triggered in the May contract as it slipped through support at $5.47.

Traders said the Comex options expiry at the end of the week was unlikely to become a major factor for the market. Although open interest remains relatively high in the $5.75 and $6.00 call options, those strikes are considered unlikely to come into the money after today's setback.

Comex warehouse stocks fell back below 140 million ounces Tuesday, according to data released after the close, declining 1,196,002 ounces to 139,927,831.

PLATINUM

Nymex platinum settled lower, as Monday's rally in gold and silver proved unsustainable and those markets tumbled, dragging platinum lower with them, traders said.

Platinum's losses were muted by comparison, however, as it had lagged the other precious metals during Monday's upward move.

July platinum settled $1.70 lower at $410.70 an ounce, traded from $413.50 to $410.10. Volume was moderate at an estimated 2,285 lots, up from Monday's light 1,208.

The premium to June gold firmed $1.90 to $13.60.

June palladium went out $1.60 weaker at $141.00 an ounce.-Reuter