Gold lower in early London trade, looks to support at $620/oz

Gold lower in early London trade, looks to support at $620/oz

London (Platts)--7Jun2006

Gold was marked lower in early London trade Wednesday as the dollar
posted gains against the euro and oil prices continued to soften.
Spot bullion was indicated at $623.20-624.20/oz at 0800 GMT, down from
Tuesday's afternoon fix at $627.00/oz but in line with overnight Asian trade.
"Long liquidation has been a feature in Asia this morning with both over
the counter and TOCOM traders on the offer," said James Moore, analyst at
thebulliondesk.com, in his daily report Wednesday.
"Further technical- and physical-related support is expected around $620,
however a break lower could trigger a swift move back to $575-600, the lower
end of the current up channel," he added.
Standard Bank London suggested that further weakness in the price "could
be expected in the near term as the metal continues to consolidate toward the
traditionally quiet summer period," pegging interim support around $615/oz and
the 100-day moving average just under the $600/oz level.
The dollar extended gains in late trade Tuesday after fresh comments from
a senior Federal Reserve official reinforced expectations of a further rise in
interest rates by the US central bank on June 29.
"If inflation turns out to exceed our expectations, our target range, I
do not believe we can count on a slowing economy to bring inflation down, by
itself, quickly," St. Louis Fed president William Poole told The Wall Street
Journal.
The reported remarks came a day after Fed chairman Ben Bernanke indicated
that inflation had risen to "unwelcome" levels that would require vigilance.
The euro was bid at $1.2816 at 0800 GMT, down marginally from Tuesday's
closing level of $1.2819, having earlier hit an intraday low of $1.2779.
The link between gold prices and the euro-dollar exchange rate has been
reinstated strongly in recent weeks, SG suggested in its Precious Metals
Weekly this week.
"Correlation analysis shows that in the first three months of the year,
the correlation coefficient was only 4%, but in April and May it rose
dramatically, to 75%," SG said. The change reflects gold's movement away from
prices justified by underlying fundamental costs of production and "shows that
as the commodities euphoria started to wane, so currencies (and the outlook
for interest rates) became important once more," the report said.
"This has been even more the case as the market has sought to recover
from its correction and is likely to remain so in the near term," SG said,
adding that trade this month ahead of the two-day Fed meeting, which begins on
June 28, was expected to be "choppy and nervous."
Front-month Brent futures for July delivery on London's Intercontinental
Exchange slipped Wednesday afternoon in Asia, extending Tuesday's 56
cents/barrel fall as the markets awaited a fresh round of US inventory
statistics due out later in the day.

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