Daily Gold Update

Source: Marketwatch

New York— Gold futures rose Tuesday in very choppy trading, as investors eyed violence in the Middle East, declining energy prices and the rising dollar.

Gold for August delivery closed up $4.80 at $618.0 an ounce on the New York Mercantile Exchange.

"It [trade] has been volatile due to thin conditions as many participants are simply out on holiday," said Jon Nadler, analyst at Kitco.com. "The $15 range is not very large, but each news item and large trade (buy or sell) have an immediate effect."

James Moore of TheBullionDesk.com said that trading volatility will likely increase as "traders take time off for summer vacations, reducing liquidity and leaving the market more vulnerable to sharp swings in either direction."

Gold moved in both directions on Tuesday, rising on dimmed hopes for peace in the Middle East and falling on the surging dollar.

The dollar posted gains against major counterparts after stronger-than-expected housing and consumer confidence data revived rate expectations.

Crude-oil futures dropped on Tuesday. Crude for September delivery was last down $1.10 at $73.95 a barrel on the New York Mercantile Exchange. The contract rose Monday as natural-gas futures reached a more than one-month high on expectations triple-digit temperatures across much of the U.S. would boost energy demand.

"Gold bullion regained some of the ground it lost on Monday after it became apparent that the U.S. will let Israel sort out the Hezbollah problem on its own timetable," Nadler said.

"Trading in a $10 range did not make for too much excitement early on Tuesday, as many would-be buyers want more of a convincing demonstration from gold as to its abilities to act as a protector of their assets in troubled times such as these," Nadler said.

Overnight, violence in the Middle East continued to take lives, as U.S. Secretary of State Condoleezza Rice met Tuesday with Israeli Prime Minister Ehud Olmert, who said that his government was resolute about continuing its fight against Hezbollah, according to media reports. Later Tuesday, Rice also met with Mahmoud Abbas, the president of the Hamas-led Palestinian Authority.

Rice arrived in the region a day earlier in what is the first American on-the-ground diplomatic effort to resolve the conflict between Lebanon and Israel. The fighting broke out on July 12 after Hezbollah militants kidnapped two Israeli soldiers.

The Bush administration has supported the Israeli military campaign against Lebanon, saying that the root cause of the violence — the domination by Hezbollah of southern Lebanon — has to be resolved before a cease-fire can be enforced. Both President Bush and Rice have opposed calls for an immediate cease-fire.

Since fighting started, more than 380 Lebanese citizens, mostly civilians, have been killed. The country's infrastructure as well as many towns in southern Lebanon and the capital Beirut have been heavily bombarded.

On Monday, in a surprise visit to battered Beirut, Rice met with Lebanese Prime Minister Fuad Saniora who told her that Israel is destroying his country. Rice's peace proposals were rejected in Lebanon on Monday. Rice is lobbying for a plan that would lead to a cease-fire and the deployment of international and Lebanese forces in southern Lebanon to stop Hezbollah attacks on Israel. Rejecting Rice's plan, Lebanese parliament speaker Nabih Berri, who has close ties to Hezbollah, said that there should be an immediate cease-fire.

On Tuesday, Hezbollah launched at least 10 rockets at the Israeli port city of Haifa, while Israeli troops were fighting Hezbollah militants in the southern Lebanese town of Bint Jbeil, according to media reports. About 40 Israelis have died since the beginning of the conflict.

Other metals prices also posted gains on Tuesday. Silver added 2.50 cents at $10.945 an ounce and palladium edged up 95 cents at $317 an ounce. Platinum rose $20.20 at $1,229.50 an ounce.

Copper gained 2.3% and finished up 7.90 cents at $3.4610 a pound. Problems at two giant mines in Chile have generated worries about copper supply.

On Tuesday, Chile's Codelco, the world's largest copper producer, said that a July 23 rock slide at the Chuquicamata mine will likely reduce copper output by 1,000 metric tons a day.

Also in Chile, the union at the Escondida copper mine said it will vote for a strike in a meeting on July 28. BHP Billiton owns 57.5% of Escondida, which produces 8.5% of the world's copper.

The union has threatened a strike if BHP didn't agree to its wage demands during the August negotiations of a new contract. Escondida workers are demanding a wage increase of 13% above inflation, while BHP has said that its final offer is 1.5% above inflation.

On the positive side, BHP Billiton's June quarter production figures were broadly in line with expectations, said Nick Hatch, analyst at Investec Securities. BHP reported strong performance in gas and i