NEW YORK (MarketWatch) - Gold futures closed lower Monday, surrendering their modest Friday gains as the dollar soared against other major currencies on continued expectations that U.S.interest rates are headed higher.
Gold for August delivery closed down $9.30 at $572.40 an ounce on the New York Mercantile Exchange.
"Most investors remain neutral to bearish and are opting either to observe the action from the sidelines or to purchase smaller amounts in a quest to average their costs for the long term," said Jon Nadler, investment products analyst at bullion dealers Kitco.com.
Silver closed down 16 cents to $9.97 an ounce, platinum dropped $6.80 at $1,137.8 an ounce, palladium lost $10.95 to $295.10 an ounce and copper lost 13.90 cents to $3.1525 a pound.
"Dealer selling following modest gains in the dollar and light selling in the energy sector have put pressure on the metals again," said James Moore, analyst at TheBullionDesk.com, in a Monday note to investors.
Still bolstered by expectations that the Federal Reserve will continue to increase interest rates, the dollar soared against major currencies Monday, hitting an eight-week high against the Japanese yen.
"Gold was overbought and the dollar was oversold," said Brien Lundin, editor of Gold Newsletter.
"The news of more rate hikes was unexpected and came at a time when the market was peaking - it was horrible timing for gold," Lundin said. "Now that the market has come to grips with rate hikes, you see a bottoming action in the markets. We may have another four to eight weeks of relative weakness."
During the gold bull market since 2001, gold prices have typically bottomed from mid-July through mid-August, Lundin said.
Gold has fallen about 21% from its May peak above $730 an ounce, swept up in a broad commodity sell-off that many analysts believe is now nearing an end.
"We stand by the statement that the lows seen mid-week at or near $545-550 shall prove inviolate," said Dennis Gartman in The Gartman Letter on Monday. "We said then, and we are reiterating here this morning, that those not long of gold should become long of it; those already long should add to their positions."
Peter Grandich, editor of the Grandich Letter, agreed: "While a retest of the low last week can't be ruled out, any weakness is a great buying opportunity, because all the key bullish fundamentals that led this secular bull market up remain."
A softening of tensions between Iran and the west over Tehran's nuclear research program contributed to the decline in the price of gold, but weekend reports that North Korea is about to test a long-range missile might strengthen gold in the coming days.
Kitco's Nadler doesn't exclude the possibility of "surprise upward surges driven by either massive injections of monies by hedge funds or by any deterioration of the surface calm present in the Iranian situation or of the aggravation of the new complications presented by North Korea's nuclear capabilities and chest-pounding."
Crude oil for July delivery also posted losses early Monday and was last down 93 cents at $68.95 a barrel.
See crude futures. On Friday, Iranian President Mahmoud Ahmadinejad described as a "step forward" the package of incentives offered by the permanent members of the United Nations Security Council and Germany to encourage Tehran to halt uranium enrichment, the BBC reported.
The offer is said to include trade and financial incentives as well as technical assistance in building a light-water nuclear reactor for civilian energy generation. The U.N. is concerned that Iran is building nuclear weapons, but Iran has denied the charges. The United States said that Ahmadinejad's remarks were "encouraging" and that it expected an official answer to the proposed package soon.
"The Iranian nuclear stand-off was a primary factor in the rise in gold over the spring," Lundin said. "The markets were concerned about a disruption in oil supply."
In contrast to the positive news from Iran, North Korea's nuclear ambitions reappeared in the media over the weekend. An unnamed American official told the New York Times that North Korea has finished fueling a missile, which is perceived as an indication of preparations to test launch the missile.
On the supply side, inventories of gold were down 585 troy ounces at 8.03 million troy ounces as of late Friday, according to Nymex data.
Silver supplies fell by 842,950 troy ounces to 104.9 million troy ounces, and copper inventories fell by 345 short tons to 7,584 million short tons.
The indexes tracking the metals sector all went down on Monday. The Philadelphia Gold and Silver
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