Daily Gold Update

Source: CBS.MarketWatch.com

San Francisco— Gold futures climbed to their highest level in a month Tuesday as rising oil prices and easing concerns about inflation and a strong U.S. dollar sparked investment demand.

The current rally in the gold futures contract has totaled more than $10 an ounce over the last three sessions.

There has "been a remarkable level of demand from Asia, and recently growing demand from the Middle East," said Brien Lundin, editor of Gold Newsletter. "Some of this new buying appears to be directly tied to the rising price of oil, and the profits being realized in the oil-producing nations of the region."

Profits made through selling oil in dollars are "finding a home in Treasuries and somewhat in gold," noted John Person, head analyst at Infinity Brokerage Services.

Against this backdrop, gold for December delivery closed at $406.70 an ounce on the New York Mercantile Exchange, up $1.50. It has gained $10.10 in all in the three sessions.

"While the market will remain volatile, it is likely that a new attack on $430 is at hand," said Lundin.

Economic data released Tuesday — on housing starts and inflation at the retail level — also served as a key driver for gold. "The latest round of economic data to come from the U.S. … again proved unfriendly for the greenback, with the figures suggesting growth in the U.S. was slowing," said James Moore, analyst at TheBullionDesk.com in London.

U.S. consumer prices fell a seasonally adjusted 0.1 percent in July, the Labor Department said.

In addition, U.S. homebuilders started homes at a seasonally-adjusted annual rate of 1.978 million in July, the Commerce Department said. This easily beat economists' expectations.

Peter Grandich, editor of The Grandich Letter, an investment advisory publication, said the data "continue to suggest moderate growth at best, which is a net negative to the overblown fears that the U.S. dollar would rise sharply and be bad for gold."

"Strong physical buying on major declines has allowed a very strong base under $400 to be formed," he said, adding that "most of the ingredients are now in place for a retest of the highs in the $435 area before year's end, and a move to $500 in 2005."

From here, Infinity's Person sees the Federal Reserve "on hold from raising rates aggressively with a steady momentum for economic growth," he said.

Other metals futures ended mixed, with silver, platinum and copper lower, but palladium closing higher.

September silver shed 0.7 cent to close at $6.73 an ounce, while October platinum fell $3.80 to $879.40 an ounce after climbing to a four-month high in the previous session, and September copper closed at $1.3075 per pound, down 0.8 cent. September palladium added $1.65 to end at $218.65 per ounce.

Tracking inventories, copper supplies were down 672 short tons at 70,402 short tons as of late Monday, according to Nymex. Silver stocks were up 1.98 million troy ounces at 112.2 million, while gold inventories stood at 4.71 million troy ounces, down 899 troy ounces from the previous day.