COMEX gold ends up on bombings, weak dollar

NEW YORK, May 17 (Reuters) – Safe-haven buying lifted COMEX gold on Monday after bombings in Iraq and Turkey shook the dollar, but profit-taking cut gold’s gain after news a weapon containing the nerve agent Sarin was found in Iraq.
June gold closed up $2.50 at $379.60 an ounce, backing off the top of its $376.80 to $383.70 range after the Army said a small amount of sarin was found in a shell that exploded in Iraq, having been rigged as an improvised explosive device.
The round, designed to mix sarin in flight, belonged to a class of weapon that the ousted government of Saddam Hussein claimed to have destroyed before the 1991 Gulf War.


“When the news came out about the sarin gas being found gold came off. I guess it’s another example of buy-the-rumor, sell-the-fact,” said Paul McLeod, a vice president of precious metals at Commerzbank Securities. “You would have thought it would go the other way.”
Gold’s morning rise was kicked off after a suicide car bomber killed the head of Iraq’s Governing Council on Monday, increasing fears of instability before the hand over of power by U.S. occupiers in six weeks.
“There’s been a great deal of new buying in gold in Europe and New York,” said Frank Aburto, trader at F.C. Stone. “The situation in Iraq doesn’t look like it’s improving at all and we are running short of time.”
The killing of Izzedin Salim and six others outside the “Green zone” headquarters of the U.S.-led authorities in Baghdad followed the explosions late Sunday of four small bombs outside branches of the British bank HSBC in the Turkish cities of Ankara and Istanbul just hours before British Prime Minister Tony Blair arrived in the country.
The dollar dropped more than 1 percent against the euro and Swiss franc after the blasts, making dollar-priced metals a better buy for investors holding foreign money.
A week ago COMEX gold slumped to $371.30, its lowest in seven months, as confidence in a lasting U.S. economic recovery lifted the dollar and tarnished precious metals. In April, gold touched a 15-year high at $433.
Meanwhile, a decline in the size of bullish bets by commodity funds last week opened the door to more speculative buying in the market, analysts said.
Friday’s CFTC Commitments of Traders report showed the net speculative long position in gold futures fell to 38,016 contracts as of May 11 from 54,663 contracts on May 4.
It was the smallest bet on rising prices since July 15, 2003, having been reduced in recent weeks by long liquidation and short selling, said IFR Markets analyst Tim Evans.
“While a true bear market with funds running shorts is possible in theory, the fuel for further long liquidation is now vastly reduced and the potential for a fresh round of long accumulation has been replenished,” Evans said.
Spot gold rose to $379.35/0.05 from Friday’s late quote in New York at $376.70/7.45. London bullion dealers fixed gold in the afternoon at $382.95.
In other metals, COMEX July silver <0#SI:> ended down 5.3 cents at $5.675. It too rose in the morning, traveling in a $5.905 to $5.635 range. Spot silver was at $5.65/69, off from $5.71/75. Monday’s silver fix was at $5.81.
NYMEX July platinum <0#PL:> rose $21.30 to $815 an ounce. Spot platinum closed at $815.00/820.00.
June palladium <0#PA:> rose $2.20 to $245.00. Spot fetched $237.50/243.50.
©2004 Reuters Limited.

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