Gold moves back below $700/oz

PRECIOUS metals prices were under pressure today amid profit taking, with gold giving up around $20 an ounce and platinum almost $30/oz.

On Friday spot gold climbed to $730,30/oz - its highest level since January 1980, largely on the back of speculative fund interest driven by the oil price, the weaker US dollar as well as inflation and geopolitical concerns, traders said.

In late afternoon trade, the metal was quoted at $691,10/oz from $714.50/oz at its overnight close.

"We have had a busy day on the precious metals market. Earlier we saw some profit-taking in gold and the metal traded briefly below $690/oz.

"However, we have seen strong buying interest from hedge funds and dealers," said TheBullionDesk.com’s James Moore.

Longer term, the market was still firmly in a bull trend, he said. However in the short term gold is susceptible to bouts of profit-taking, he added.

Moore said he expected good support for gold at $650/oz.

Platinum was also weaker, dragged down by the fall in the gold and silver price.

"Today we saw the release of the Johnson Matthey Platinum report which suggests that we will remain in a deficit, so I expect the platinum rally will continue," he added.

The report stated that platinum supply was in deficit for a seventh year in 2005 due to surging demand, and the trend should accelerate this year amid increasing demand for the metal from Europe’s automobile industry.

Moore said he expected the platinum price to stabilise and work higher again.

AFX reports from New York that gold futures tumbled nearly 3% early Monday as a rally in the US dollar helped extend a pullback from 26-year highs.

Gold for June delivery was last down $20,10, or 2,8%, at $691.70 an ounce in electronic trading, recovering slightly from a low of $685,60 hit earlier in the session.

The precious metal has now lost $40,30 since reaching a high of $732 in intraday trading on Friday, which was the highest price seen since 1980.

A falling US currency has been one of gold’s drivers as investors chose to park money in the metal for its safe-haven status.

Other metals prices were also lower, with July silver plunging $1,090, or 7,7%, at $13,145 an ounce and July copper shedding 26,40 cents, or 6,8%, to $3,60 a pound.

The biggest decliner was June palladium, which was knocked down $43,35, or 11%, to $355 an ounce. July platinum slumped $33,80, or 2,6%, to $1,284.70 an ounce, after running up 11% the prior week.

CIBC analyst Barry Cooper said he expects gold prices to "pause and possibly pull back by 10%" in the near term during the typically quiet summer period.

Over the long term, however, Cooper said he sees prices continuing higher, and expects an average price of $730 to $735 an ounce for the rest of 2006.

For 2007, he lifted his price forecast to $850 an ounce from $650, AFX reported.

In January 1980, gold fixed at its highest level ever of $850/oz.

Platinum was last quoted at $1,285/oz, down $29/oz from its previous close of $1,314/oz. On Friday platinum climbed to $1,337.50/oz - its highest level ever.

Palladium was last quoted at $397/oz. Last Friday, palladium reached $404,50/oz - its highest level since January 2002.