Gold Futures Tick Lower

The December contract loses 60 cents to $606.80.
Author:
Publish date:

Updated from 11:51 a.m. EST

Gold ended little changed Tuesday following an erratic session that saw prices trade in a $7 range.

After seesawing between $602.30 and $609.30 an ounce, futures for December delivery of bullion settled off 60 cents at $606.80 on the Comex division of the New York Mercantile Exchange.

But it was in the after-hours session that things really got moving, with prices touching $610 as the dollar continued to slide.

More news of a slowing economy weakened the greenback Tuesday, and for a time gave gold a shot in the arm. The Conference Board's consumer confidence index was softer-than-expected, arriving at 105.4, compared with a forecast of 107.8. The prior-period figure was revised upward to 105.9 from 104.5.

Also released was the monthly Chicago purchasing managers' index, which, at 53.5 for October, fell below expectations of 58 and September's 62.1.

The news points to cooling economic activity in the future, and therefore got investors focused on prospects for a change in the views of the

Federal Reserve

.

"The market is again thinking about a rate cut, after last week having pushed its expectations into Aug '07," Randy Diamond, an analyst at Miller Tabak in New York, wrote in a research note. He adds that now fed funds futures seem to suggest a May cut by the Fed, or possibly even March.

Foreign-exchange traders reacted to the data by marking down the dollar. Currency investors often make their picks according to expectations of future returns from short-term rates. The dollar was buying 116.91 yen recently, down from 117.40 yen late Monday. It was also losing against the euro, trading at $1.2762 compared with $1.2730 previously.

Reduced tensions regarding North Korea's nuclear ambitions, as well as falling oil prices may have a dampening effect on any gold rally, notes Jon Nadler, an analyst at Montreal-based bullion dealer Kitco, in a daily market brief.

Others see evidence of extremely tough technical obstacles around the $610-$612 area. That is not, however, repressing the gold bulls.

"I think we'll break through this resistance area," says Peter Grandich, editor of the

Grandich Letter

who identifies a number of factors which should help gold prices surmount the chart impediment. From a contrarian's viewpoint, he says, recent bearish reports on the precious metals, as well as the exit of the hedge funds from the market, are positives.

Elsewhere, the European Central Bank announced it had sold gold worth 65 million euros last week, or about 4.3 tons.

As for the exchange-traded funds that hold gold, the

iShares Comex Gold Trust

(IAU) - Get Report

and

streetTracks Gold Shares

(GLD) - Get Report

were both rising about 0.3% recently.

Among the miners, Prudential upped its price target on

AngloGold Ashanti

(AU) - Get Report

to $37 a share from $30, but that's still lower than the stock's current trading level around $42, up 1.7% lately.

Elsewhere, in base metals Comex December copper contracts closed down 1.3 cents at $3.3455 a pound.

In ferrous metals,

U.S. Steel

(X) - Get Report

reported third-quarter earnings of $3.42 a share, compared with 71 cents in the prior period. Consensus estimates among analysts had been about $3.21.

Still, investors weren't impressed, and the stock was sliding, off 1.6% recently.

Meanwhile, Goldman Sachs initiated coverage of

Chaparral Steel

(CHAP) - Get Report

with a neutral rating and $40 price target. That's marginally below the current stock quote, which was down about 1.2% at $41.74.