Short squeeze in gold is near, Grandich says

Gold Futures Rise as Dollar Drops, Mideast Talks Snag

By Polya Lesova
CBSMarketWatch.com
Wednesday, July 26, 2006

http://www.marketwatch.com/News/Story/Story.aspx?dist=newsfinder&siteid=...

NEW YORK -- Gold futures surged Wednesday as the dollar dropped against major currencies and as international talks on the Mideast conflict dead-ended with the U.S. rejecting calls for an immediate cease-fire.

Gold for August delivery ended up $3.90 at $621.90 an ounce on the New York Mercantile Exchange.

The downward trend in the dollar was the main reason for gold's positive close, said Charles Nedoss, senior account manager at Peak Trading Group in Chicago.

"I don't think things are getting any better in the Middle East," Nedoss added. He said that gold will experience resistance around $627, but if the Mideast situation continues to worsen and the dollar keeps falling, then gold might trade higher for the rest of the week.

Other metals prices traded mixed. Silver edged up 13.5 cents at $11.08 an ounce and platinum rose $4.90 at $1,234.40 an ounce. Palladium dropped 10 cents at $316.90 an ounce and copper declined 1.2 cents at $3.4495 a pound.

"Ongoing support to the safe-haven asset class continues to come from the apparently escalating Lebanese conflict, the utter meltdown of the U.S. nation-building experiment in Iraq, and the previous tensions with Iran," said Jon Nadler, analyst at Kitco.com.

"We remain in a consolidation phase for gold (with shades of negative sentiment) and are searching for more concrete direction in coming weeks," Nadler said.

Peter Grandich, editor of the Grandich Letter, said there appears to be a heavy "short" presence in gold, "based on the fact that gold has been hit hard on several occasions of late, shortly after the second London fix, when European physical buying is over. "I believe these sellers are exhausting themselves and a short squeeze is near," Grandich said.

The dollar dropped against major currencies Wednesday after the Federal Reserve's Beige Book report said upward pressure from energy and other inputs is persisting despite reports of a slowdown in the U.S. economy. ...