Capital Gold Group Report: Profit Taking on Gains in Gold Creates Buying Opportunity

Gold for June delivery dropped $10.30 to end at $918.30 an ounce on the New York Mercantile Exchange.

"The strong dollar, weak crude and a possible over-reaction to the Fed minutes yesterday seem to be driving gold lower," said Zachary Oxman, a senior trader at Wisdom Financial.

"Until we cross and close above the $940 level, we'll remain range-bound between $900 and $940," Oxman said.

Federal Reserve officials have lost their appetite for more interest-rate cuts, even if the economy sinks into recession, according to the minutes of their last policy meeting released Wednesday.

"A day of profit-taking in crude oil put a significant damper on precious as well as base metals, highlighting just how much of their recent revival was in sympathy with the runaway energy complex," said Jon Nadler, senior analyst at Kitco Bullion Dealers.

"A rising level of bets that the Fed will not only not cut rates at its next meeting in June, but that it will begin thinking about raising them as the year wears on supported the dollar," Nadler said.

Crude-oil futures declined, retreating from an overnight record high above $135 a barrel as traders took in profits from a four-session winning streak that lifted prices for the commodity by more than 7%. 

On the currency markets Thursday, the dollar got a lift against major rivals after better-than-expected weekly jobs data. The dollar index, which tracks the performance of the greenback against a basket of other major currencies, rose 0.4% to 72.18. 

Dollar strength typically pressures dollar-denominated commodities, such as gold and crude oil, because it makes them more expensive for holders of other major currencies.

The Labor Department reported that first-time claims for state unemployment benefits fell back in the latest week, dropping by 9,000 to 365,000 on a seasonally adjusted basis.

Separately, the Office of Federal Housing Enterprise Oversight reported that U.S. home prices fell a seasonally adjusted 1.7% in the first three months of 2008 -- the largest quarterly price decline on record. Prices fell in 43 states, according to the agency.

On Wednesday, gold futures gained $8.40 an ounce, taking the metal's total price gain to more than 7% in five sessions.

"Some profit-taking has been witnessed [in gold], which is no great surprise, considering the scale and pace of gains made by the precious metal," said James Moore, an analyst at TheBullionDesk.com.

"However, given the continued upward thrust of oil and the bearish dollar sentiment, we expect gold to remain strong and to target the $954 highs of March and February in the coming sessions," Moore said in a research note.

Also on the Nymex, July silver futures fell 3 cents to $18.02 an ounce. July platinum fell $37.30 to end at $2,183.80 an ounce and June palladium futures dropped $6.25 to end at $456.95 an ounce. July copper fell 3 cents to $3.71 a pound.

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