Updated from 12:17 p.m. EDT
Gold finished off its lows and other metals bounced back into positive territory on Wednesday, overcoming renewed dollar strength.
Gold for August delivery dropped $2.10, or 0.3%, to $632.60 an ounce, recovering from an earlier drop to as low as $621.30.
Among other metals, silver for July delivery advanced 4 cents to $11.89 an ounce, rebounding from a morning fall to $11.35, and copper for July delivery rose 7 cents to $3.56 a pound, after dropping to $3.35.
Exchange traded funds tracking the metals also turned higher. The
iShares Silver Trust
was up 1.4% and the
StreetTRACKS Gold Trust
was up 0.3%.
Gold, which had surged 46% to a 26-year high of $730 from the start of 2006 through early May, has now corrected by a $100, or 14%, over the past few weeks, prompting some gold bugs to suggest it might be time to get back in the market.
Peter Grandich, who had
predicted the correction the day before it started is among them. "Now today, I find gone is most of the wild speculation that was occurring daily just a few weeks ago," he says.
Gold may have to test the $575-$600 level to make sure an interim bottom is in place, Grandich says, "but most of my technical indicators have now returned to the bullish side or are at least no longer very bearish."
Still, the same concerns that have pressured commodities in recent weeks remain in place. Commodities, and especially metals, have been hit by concerns that central banks are raising interest rates to curb growth and inflation pressures, notably from soaring commodities prices.
In particular, fears that the
will continue lifting rates in an already slowing U.S. economy have muddied the outlook for global growth and demand for commodities. Altanta Fed president Jack Guynn added to such concerns Wednesday.
"Headline measures of inflation of late have been bothersome, with higher oil prices contributing to much of the run-up in those broad readings," Guynn said in a speech. "Core inflation, which excluded volatile food and energy costs has moved into the upper end of -- or beyond -- the range I consider acceptable over time,"
In reaction, fed fund future raised odds of a June rate hike rose to 84% from under 50% on Friday, according to Miller Tabak.
Metals trading will likely continue a "daily juggling" of different factors, such as economic data, the dollar and oil prices -- that may affect the Fed's decision on rates at the end of month, says Amaury Conti, metals-mining stock trader at investment advisor Austin Calvert-Flavin. "But until we get concrete evidence of a slowdown, you'll see people that are interested" in metals and commodities.
Gold and other metals had again opened under pressure Wednesday amid renewed dollar strength. A stronger greenback pressures the value of dollar-denominated commodities such as gold, as it takes less of the currency to buy the same amount of gold.
In recent action, the Dollar Index, which measures the greenback against a basket of key currencies, was up 0.2%.
Gold, in particular, had benefited from expectations that the dollar will resume a multiyear decline once the Fed stops its 24-month-old campaign to raise interest rates. But these expectations were again frustrated by hawkish comments from Fed Chairman Ben Bernanke on Monday and by other Fed officials on Tuesday and on Wednesday.
At the same time, a weaker-than-expected May employment report has fueled concerns over slowing growth, even amid inflation pressures.
Speaking to Congress for the first time since his retirement, former Fed Chairman Alan Greenspan said on Wednesday that high energy costs are beginning to impact growth. Meanwhile, Bernanke and other Fed officials said this week that slowing growth won't be enough to curb inflation, hinting that rates may have to go up further.
On Thursday, the European Central Bank is also widely expected to lift interest rates.
Gold, which also acts as a hedge against inflation and a safe haven asset, also lost ground as tensions over Iran's nuclear ambitions, and crude oil prices, continued to ease. In recent action, crude oil for July delivery was down $1.85 at $70.65.
President Bush said Iran's response to an international offer aimed at curbing its nuclear research seemed to be "a positive step." On Tuesday, Iran's chief nuclear negotiator Ali Larijani said that the package of incentives contained "positive steps."
A more conciliatory tone between the U.S. and Iran also boosted the dollar, according to Ashraf Laidi, currency analyst at MG Financial.
Concerns that the U.S. may resort to military action against Iran or otherwise disrupt oil supplies from the world's fourth-largest producer of crude oil had weighed on the greenback, he says. "Fading prospects of military action and blocked oil waterways in the Arab Gulf is helping the greenback regain ground, especially against the safe-haven yen and Swiss franc," Laidi writes.
In addition, the International Monetary Fund has advised the Bank of Japan to not be too quick in ending its zero-rate policy, which could further boost the dollar vs. the yen, he notes.
Yet these factors are only delaying further dollar weakness, according to Chintan Karnani, metals analyst with New Delhi, India-based Insignia Consultants.
"All the interest-rate hype will be settled sooner than later and the greenback should once again start its weaker journey," he writes, adding that volatility and weakness are likely to remain in metals until then, as the market continues to correct from its previous speculative bull run.
"The current slide in gold and silver as well as global stock markets is just a short term cyclical bear rally driven by expectation of higher global interest rates, higher treasury yields, a stronger U.S. dollar and reduction in liquidity," he writes.
Overall, shares of metals miners were also off earlier lows in recent action. The Philadelphia Gold and Silver index was recently down 0.8% and the Amex Gold Bugs index was down 1.2%, with both indices recovering from over a 2% drop earlier. The CBOE Gold index was down 1.2%, after dropping 3%.
Among the biggest decliners,
Agnico Eagle Mines
was down 3.4% and
was down 2.1%.
was down 2.6% after cutting its gold production forecasts because of technical problems at a plant in Guatemala. The Reno, Nevada-based company said it now expects to produce 620,000 ounces of gold this year instead of the 670,000 ounces previously forecast.