SAN FRANCISCO (MarketWatch) -- Gold futures edged lower by the close of Nymex trading Thursday as investors awaited signals from the Fed on rates and inflation, while most mining stocks gave up their earlier gains.
Gold for December delivery fell $1.50, or 0.2%, to $673.90 an ounce on the New York Mercantile Exchange.
Investors avoided taking big positions ahead of a much-anticipated speech by Federal Reserve Chairman Ben Bernanke Friday. Buyers of bullion, which can act as a hedge against inflation, are waiting for more signals from the Fed on how its monetary policy committee will act at its Sept. 18 meeting. Traders are anticipating a cut to the federal funds rate.
'If there is a rate cut that would be bullish for gold because it might lead to weakness in the dollar,'
— Tom Winmill, Midas Fund |
"Everyone is wondering if he's going to suggest he'll lower interest rates to inject liquidity or control volatility in the markets," said Tom Winmill, portfolio manager for the $160 million Midas Fund (MIDSX), which invests in the stocks of gold and other natural resource companies.
"If there is a rate cut that would be bullish for gold because it might lead to weakness in the dollar," he said in an interview Thursday.
Watch earlier interview with Winmill.
On Thursday, the precious metal found little support from the dollar, which edged up against the yen and euro and was nearly flat vs. the British pound.
Copper futures closed nearly unchanged at $3.35 a pound. Among precious metals, silver for September delivery slipped 5 cents to $11.791 an ounce. October platinum lost $6.70 a pound to close at $1,260.10 an ounce, while palladium slipped 20 cents to close at $335.60 an ounce.
Gold warehouse inventories were unchanged at 7.09 million troy ounces as of late Wednesday, according to Nymex data. Silver supplies fell by 786,456 million troy ounces to stand at 130.6 million troy ounces and copper supplies were unchanged at 20,705 short tons.
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Equities relinquish rally
Indexes tracking mining and metals gave up their gains by the close, following the broader market.
The Amex Gold Bugs Index fell 0.9%, with a 3.2% drop in the shares of Eldorado Gold Corp.) one of the more notable decliners. Newmont Mining Corp. shares also retreated, ending 0.4% lower. Meridian Gold Inc. was a rare exception, rising 3.2%.
The Philadelphia Gold and Silver Index closed down 0.4%, and the CBOE Gold Index ended down 0.2%.
A sharp drop since late July in the Philadelphia Gold and Silver Index has triggered an indicator RBC Capital Markets analyst Stephen Walker said is a buying opportunity for precious metals equities.
"During the past few weeks, we have seen gold equities decline significantly along with the overall market, while gold has been roughly flat," he wrote in a note to investors Thursday. The ratio of gold prices to the [Philadelphia Gold and Silver] index has widened to 5 from 4.5 on July 31, he said.
When this ratio rises above 5, the average one-year return on holding stocks in the Philadelphia Gold and Silver Index has been 40%, "offering attractive returns for both generalist and specialty resource fund managers," he said.
Walker named Goldcorp Inc., Iamgold, Centerra Gold Inc., Jaguar Mining Inc., Anatolia Minerals and Greystar as the brokerage's best picks.
Action on the exchange-traded funds that act as a proxy for the actual metals also led to losses.
StreetTracks Gold Trust ETF edged down 0.4%. The iShares Silver Trust ETF fell 1% and the Market Vectors-Gold Miners ETF slid 1.2%.
Polya Lesova is a MarketWatch reporter based in New York.
Laura Mandaro is a reporter for MarketWatch in San Francisco.
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