Daily Gold Update

Source: Marketwatch

San Francisco— Gold futures climbed Friday to close at their highest level in more than a week, boosted by a weaker U.S. dollar and uncertainty surrounding the outlook of the U.S. economy.

Gold's benchmark contract finished $1.90 above the week-ago closing level.

"With stable equity markets, gold is able to concentrate on the declining dollar spurred by inflationary data," said Peter Spina, a chief investment strategist at GoldSeek.com, in e-mailed comments.

And "despite a truckload of new gold bears and many gold bulls openly licking their wounds, gold has once again shown its internal strength by consolidating its overbought condition and now resuming its climb to $700+," said Peter Grandich, editor of the Grandich Letter, in e-mailed comments.

Gold for April delivery rose $6.80 to close at $653.90 an ounce on the New York Mercantile Exchange. It climbed as high as $656.50 earlier, a level not seen since last Friday, though it hasn't closed at a level this high since March 8.

"Gold finds itself once again pushing the $655-$660 resistance," said Spina. "A break above should bring in additional momentum and extend its rally."

But "with the subprime debacle resonating in the background, the threat of another market sell-off does remain a concern for the metals, which have become vulnerable on such strong selling pressures — a rush for liquidity," he said.

For now, "stable equity markets do allow gold to return its focus on the fundamentals and we see this today with the U.S. dollar back testing important technical support levels," he said.

The dollar fell sharply Friday, strengthening demand for gold. The euro was last up 0.3%, while the dollar was down 0.4% against the yen.

"The terminally ill U.S. dollar and the mounting economic and political woes in the U.S. are only added reasons to expect $700 faster than most could imagine," said Grandich.

And "it is encouraging to see gold reacting once again to a decline in the U.S. currency," said Jon Nadler, an analyst at Kitco Bullion Dealers, in e-mailed commentary. "Whether such a reaction becomes as reliable as it previously was remains to be seen."

Like the dollar, gold showed little reaction to U.S. consumer-inflation data. Consumer prices increased 0.4% in February, a little higher than expected, led by higher prices for food, energy, shelter and tobacco, the Labor Department reported earlier Friday. Core prices, excluding food and energy, increased 0.2% in February, as anticipated.

"The CPI came in slightly higher than expected, not nearly as hot as the PPI [producer price index], but higher nonetheless," said Neal Ryan, director of economic research at Blanchard & Co.

"The debate between economic-growth concerns and inflation-fighting concerns should ratchet up significantly over the coming months should reports like these be duplicated in the next cycle."

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