Gold futures lose as much as $9
Dollar retreat fails to lift gold; silver falls, but copper rises

Last Update: 12:52 PM ET May 18, 2006

SAN FRANCISCO (MarketWatch) -- Gold futures fell as much as $9 an ounce Thursday, after a fresh retreat in the U.S. dollar failed to take prices back above the $700 mark.
"Precious metals appear to be in a dilemma as to whether to continue their (welcome) correction or simply turn around and climb higher as dollar difficulties continue to undermine confidence and bolster defensive posturing," said Jon Nadler, an investment products analyst at bullion dealers Kitco.com.
"The consensus among traders remains that several sustained closings above $690 to $700 might be required to resume gold's climb beyond the $730 and $750 marks," he said.
On the other hand, "several successful tests of price areas beneath $675 could pressure the yellow metal to previous support points such as $650 then $630 or, conceivably, even $585," he warned.
That sort of move "might encourage additional physical offtake and complete a 50% correction of the overall move achieved since last year," he said. Gold futures are up more than 30% year to date.
Gold for June delivery fell to a low of $682.50 an ounce on the New York Mercantile Exchange. It was last down $7.30 at $684.50.
The dollar moved modestly lower against other major currencies in choppy trading Thursday, with traders cautious about taking large positions after the latest sharp move in the currency market. And the accelerated its decline after U.S. Treasury Secretary John Snow expressed dissatisfaction with China's yuan adjustments. See Currencies.
"Long-term gold investors are apparently undeterred, as they watch the sad saga of the U.S. dollar unfold while the yen and euro bask in a glow of strength," said Nadler.
"Stock market weakness could also add to gold's current resilience as will, no doubt, the Iranian rejection of the terms of appeasement it was recently offered," he said, referring to the recent European Union offer of certain incentives in exchange for Iran's halt of nuclear activities.
Overall, "the persistent impression among investors ... is that inflation is making an unwelcome return in the near future and thus portfolios need the protection offered by counter-cyclical assets," said Nadler.
In other metals trading Thursday, July silver shed 61 cents, or 4.6%, to $12.61 an ounce, after already losing more than 2% in the previous session. It's trading at its weakest levels since late April.
July copper tacked on 1.85 cents to $3.69 a pound after losing more than 4% on Wednesday.
June palladium fell $20.10 to $363 an ounce, while July platinum traded down $13.50 at $1,305.90 an ounce.