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Gold settles

lower in NY

NEW YORK: COMEX gold settled lower in dull trade, slipping in sympathy with silver, traders said.

Silver finally succumbed to profit taking, they said, after three consecutive sessions of strong gains took prices to 3-1/2 month highs.

December gold settled $1.60 lower at $388.10 an ounce, traded between $389.40 and $387.80, a one-week low. A high of $389.60 was hit on ACCESS overnight. Volume was light at an estimated 13,000 lots, down from Monday's official 28,242.

Dealers quoted bullion at $382.90/$383.40.

Traders noted commission house and fund selling pressuring the gold market today.

The Federal Open Market Committee left U.S. interest rates unchanged at its meeting today, as expected.

This Thursday's Bundesbank meeting was also expected to hold German interest rates unchanged, although traders stressed that gold remains focused firmly on the silver market, where signs of nearby supply tightness have sparked a strong rally.

Gold persistently lagged silver in recent sessions, although the gold-silver ratio, based on the December contracts, rose slightly today to 67.84 from Monday's 66.56.

At the same time, traders expected gold's losses to be limited if silver is hit by a speculative selloff.

Traders said the cash market should find good support from Asian buying of physical gold around $382.00/$381.50 an ounce, with some offtake noted today at $383.50 and below.

One analyst saw no factors on the horizon likely to pry spot gold prices from their recent $388 to $382 range.

SILVER

COMEX silver settled sharply lower as profit taking emerged after three consecutive sessions of strong gains, traders said.

September silver ended off 13.7 cents at $5.655 an ounce, traded between $5.755 and $5.615. December was off 13.4 cents at $5.721. Volume was estimated at 34,000 lots, with 3,603 switches, versus Monday's official 38,224.

Several traders said September would likely retest and perhaps breach support at $5.61, with subsequent support seen around $5.50 and at $5.41, the bottom of a chart gap formed by a rally last Thursday.

But one trader added that, amid continued concerns about a possible squeeze on the September contract, going short could prove risky. "We've seen (the market) come around and bite (the shorts) too many times," he said.

Data released after today's close showed a modest drop in COMEX stocks of 812,847 ounces to 147,428,228, as drawdowns appeared to slow after a drop of over 25 million ounces in the previous three days.

One option trader noted modest buying today of short-dated over-the-counter put options at $5.50 and $5.25, which he attributed to worries about a possible sudden selloff.

The Federal Open Market Committee left U.S. interest rates unchanged at its meeting today, as expected. The meeting was termed a non-event for the precious metals.-Reuter