August 30, 2006	Wednesday	Sha'aban 5, 1427

NEW YORK, Aug 29: US gold futures sank 1.1 per cent to close at a 10-day low on Monday, as storm fears faded and prompted widespread selling in crude oil and the precious metals, dealers said.

Oil prices slumped about $2 a barrel as a Caribbean storm lost strength and veered toward the east coast of Florida and away from oil rigs in the Gulf of Mexico and oil refineries along the Gulf Coast.

Hurricane Ernesto weakened to a tropical storm but forecasters said it could regain strength as it barreled toward the Florida Keys.

With the hurricane being downgraded, that has brought in a little liquidation in the oil and also the gold, said Frank Aburto, a broker at Rosenthal-Collins Group in New York.

Gold and oil frequently move in tandem as some investors trade commodities as a group and also as some dealers use the metal as a hedge against inflation when energy prices are high.

December delivery gold fell $6.90 to $623.90 an ounce on the New York Mercantile Exchange's COMEX division, trading from $632.70 to $621 -- its lowest since Aug. 18.

Volumes were exceptionally thin due to summer vacations and a bank holiday in London, said dealers. Just ahead of the close, estimated turnover was a meager 22,000 lots. A soft dollar lent minor support to gold, players said.

The dollar eased at the start of a busy week for economic data that could shed some light on U.S. interest rates beyond next month. The euro was up at $1.2793 at midafternoon.

Gold often has a tight inverse relationship with the dollar, as traders use it as an alternative to the currency.

Jon Nadler, an analyst with Kitco bullion dealers, said some traders seem reluctant to take on safe-haven gold positions on a hunch that the Iranian nuclear situation will not be forcefully addressed by the United States and its allies, despite a looming Thursday deadline.

Precious metals markets remain subject to short-term cave-ins and (gold) could very well test the $600 area as the fresh offtake drivers of jewelry demand and additional investment demand remain wish-list items on the horizon, he said in a daily note.

Iran said on Sunday it would never stop uranium enrichment despite a looming UN deadline designed to ensure it cannot develop nuclear weapons.

The United States has threatened swift action on sanctions after Aug.

31 if Iran does not heed the UN demand. But analysts say divisions between major powers may delay any punitive measures. Analysts pegged chart support in December gold at $620 and then at $610 with resistance at $650.

Investors on Tuesday will scrutinize the minutes of the Federal Reserve's Aug. 8 policy meeting for insight into why it left its funds rate at 5.25 per cent after boosting it 17 straight times in two years to June.

US August payrolls on Friday will also be closely eyed. Spot gold slid to $613.90/615.40 an ounce, from Friday's New York close at $621.50/3.00.

There were no London bullion fixes on Monday, due to a UK public holiday.

Other precious metals fell with gold, though much of the action in silver and palladium was fueled by rollover out of the September contract into next-active December futures.

COMEX September silver closed 34.5 cents lower at $12.0250 anounce, in a range of $12.4650 to $11.96. December sank 35.0 cents to $12.1970.

Spot silver fell to $12.00/12.10 from $12.33/43 at its last close. There was no London silver fix Monday.

In platinum, NYMEX October futures lost $5.30 to end at $1,227.70 an ounce. Spot platinum dipped to $1,215/20. September palladium fell $4.35 to $341.45 an ounce. December shed $4.15 to $347.75. Spot palladium was at $340/345.

—Reuters