US gold futures resumed their downdraft on Tuesday as expectations of higher US interest rates lifted the dollar and weighed down gold, analysts said. "Gold was under pressure and I think a lot of it has to be traced to interest rates general fears that they will slow the rate in investment demand for gold and will compete with gold," said Archer Financials futures strategist Steve Platt.
Most-active gold futures for August on the Comex division of the New York Mercantile Exchange dropped $5.90 to settle at $653.10 an ounce. It set a narrow ranges between $649.50 and $656 an ounce. "We're finally adjusting to what looks like high expectations of building inflation. And interest rates are finally responding to that, which is, I think, having an adverse impact on gold," Platt added.
Gold lost ground as profit takers took advantage of the highs reached on Monday's run up. A firm dollar and falling oil prices added to gold's declines, traders said. "The dollar's starting to attract renewed interest because of the rates moving higher. And it's leading to solid long liquidation pressure as the (gold) market moves down in response," said Platt.
Dollar strength tends to hurt dollar-denominated gold prices in overseas markets. The dollar climbed against the euro for the fifth straight session, reaching a two-month high, as rising US Treasury yields lured investors over other government debt. Higher yields and concerns about inflationary pressures voiced by Federal Reserve officials have lifted the dollar. Falling oil prices also pressured gold.
US crude oil prices slid more than a dollar on Tuesday as concerns about inflation and higher borrowing costs dominated financial markets. Energy traders also sold off long positions ahead of Wednesday's US gasoline stocks data expected to rise for the sixth consecutive week.
On Monday, technical analysts pointed out that August gold found technical support at Friday's low of $647.80 an ounce, which dated back to the March 5 low at $647.20 an ounce.
While that level held again on Tuesday, traders said a break of that key support point could send gold tumbling to new medium-term lows. Comex estimated final gold volume at 63,208 lots, compared with Monday's tally of 59,846 lots. Options traded on Tuesday came to 8,930 lots. In spot trading, gold dropped to $648.30/9.80 per ounce by late on Tuesday, down from $653.40/54.90 an ounce on Monday's after hours trade.
London banks lowered the afternoon gold fix to $647.25 an ounce. Comex July silver finished down 18.50 cents at $13.09 an ounce. The range spanned $13.02 to $13.27 an ounce. Spot silver changed hands at $13.06/3.09 an ounce, down from $13.21/3.25 an ounce in late on Monday trade. The London silvers fix eased to $13.15 an ounce.
Nymex July platinum lost $1.60 to end at $1,296.40 an ounce. Spot platinum was seen at $1,288/1,292. September palladium fell $0.15 to $372.85 at the end. Spot palladium fetched $366.0/370.0 in late trade.
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