Daily Gold Update

Source: Bill Musgrave, American Gold Exchange

Austin— Building on last week's 1.7% rise, gold gained another 0.5% in choppy trade to close above $1,118 after mixed U.S. data clouded the outlook for higher interest rates, stimulating demand for alternative assets.

Factory activity tumbled in the New York Fed region, falling to its lowest level in six years in August because of steep declines in new orders and shipments. The surprisingly weak data pushed the dollar lower against major rivals and caused gold to spike as high as $1,122 as traders speculated that the Fed would be less inclined to raise interest rates in September. A falling dollar supports gold and other commodities denominated in it for international trade by making them less expensive to foreign buyers.

Later in the session, the dollar rallied and gold surrendered some of its gains on reports that U.S. homebuilder sentiment rose in August to its highest level in 10 years, suggesting ongoing strength in the crucial housing sector.

Gold sentiment continues to be buoyed by last week's unexpected devaluation of the yuan, which closed the week 3% lower against the dollar as China seeks new ways to stimulate growth in its stagnating economy. Worries are growing that a currency war may follow, as other nations feel pressure to devalue their currencies in order to make their exports more competitive.

The other precious metals were mostly higher. Silver added 0.5% and platinum rose 0.7%, reclaiming $1,000 for the first time since mid-July, while palladium fell 0.6%.

At the Comex close: December gold gained $5.70 to $1,118.40; September silver picked up more than 8 cents to $15.30; October platinum rose $6.70 to $1,000.70; and September palladium slide $3.70 to $613.80 an ounce.