Daily Gold Update

Source: Marketwatch

San Francisco— Gold futures climbed as much as $7 an ounce Tuesday afternoon, on the heels of a three-session losing streak as silver prices rebounded from a seven-session low.

"Today's surprisingly high inflation figures are spurring the metal markets higher as the U.S. dollar drops on the news," said Peter Spina, chief investment strategist at GoldSeek.com.

"It is not hard to get into the market which has corrected back to the low $600s; bargain hunters were delighted by the sell off," he said.

But "gold may falter on this rise and require a short-term period of consolidation around the lower $600s before marching back up," he said. Read the year-end outlook for commodities.

Gold for February delivery rose $6.90 to $624.80 an ounce on the New York Mercantile Exchange after trading as high as $625.30. The contract, which closed Monday under $618 at a seven-week low, had tallied a loss of $14.50 over the past three sessions.

March silver also climbed 29.5 cents, or 2.4%, to $12.80 an ounce, rebounding from a 3.5% drop in the previous trading day.

The dollar fell against the euro Tuesday after a hotter-than-expected U.S. wholesale inflation and stronger-than-forecast housing reports. The weakness allowed precious metals to rebound from Monday's lows — levels gold and silver prices haven't seen since the end of October.

Producer prices rose much more than expected in November, as the core producer price index rose by the most since July 1980, the Labor Department said. The November producer price index climbed by 2%, the biggest rise since November 1974, according to statistics.

Meanwhile, construction on new homes rebounded in November, rising 6.7% after a whopping 14% drop in October, the Commerce Department said. Building permits, meanwhile, fell 3% to a fresh nine-year low.

Metals "traders and investors alike continue to take their lead from oil and from currency market expectations," said Jon Nadler, an investment-products analyst at bullion dealers Kitco.com.

"The latter is still providing plenty of ammunition to long-term gold investors as there are plenty of dollar-undermining stories to be found among various analysts," he said.

Crude futures edged higher in afternoon dealings as traders bet that Wednesday's U.S. data reflect declines in petroleum supplies.

Against this backdrop, March copper prices fell by 1.45 cents to $3.015 a pound, but that's after climbing 1.3 cents on Monday.

March palladium gained $3.55 to trade at $328.50 an ounce and January platinum rose $21.90 to stand at $1,124 an ounce.

On the supply side, gold inventories were down 301 troy ounces at 7.47 million troy ounces as of late Monday, according to Nymex data. Silver supplies climbed 1.07 million troy ounces to 111.2 million troy ounces and copper supplies rose by 787 short tons to 32,539 short tons.

In equities Tuesday, most metals-mining shares climbed, poised to break the overall weakness they've seen in the last two trading days.

Royal Gold was one of the bigger movers in the Philadelphia Gold and Silver Index, with the company's shares up 5.2%. The index climbed 2% to 143.38.

The CBOE Gold Index traded at 149.92, up 2.3%, while the Amex Gold Bugs Index added 2.6% to stand at 341.10.

The DJ Wilshire Nonferrous Metals Index rose to 6,006.73 and the DJ Wilshire Industrial Metals Index traded at 3,308.56, with both up 0.3%. The DJ Wilshire General Mining Index tacked on 0.1% to trade at 1,342.81.