Daily Gold Update

Source: Reuters

New York— Gold rose on the COMEX on Friday, getting a double boost as a store of value from worrisome U.S. producer price data and an FBI warning that al Qaeda may be planning "spectacular" attacks inside the United States.

Reacting to signs that inflation may be less quiescent than financial markets thought, the stock market fell and gold perked up after the Labor Department said its Producer Price Index rose 1.1 percent last month, surprising a market looking for a 0.2 percent gain.

December gold ended up $2.80 at $320.90 an ounce, trading from $318.10 to $321.30, with half the gain coming in the last hour when stop-loss buy-backs kicked in. Volume was a busy 54,000 contracts, according to exchange estimates.

Spot bullion was last quoted at $320.30/80, up from Thursday's close at $317.80/8.30. London dealers fixed the afternoon spot reference price at $319.10.

Subtracting food and energy, "core" PPI rose 0.5 percent, the biggest rise since September 1999. A 0.8 percent drop in U.S. October industrial production also helped gold.

"The two numbers did help out, but I thought there would be more of a reaction. There were some people trying to cap it in front of $320," said James Pogoda, a vice president of precious metals at Mitsubishi International Corp. "In the latter part of the morning it seemed to be capped there and then we found some stops over $320."

Gold got extra support on reports of an FBI warning that national landmarks and other sites including aviation, petroleum and nuclear, could be targets of attacks that may use conventional explosives, truck bombs, aircraft or watercraft.

But because of a lack of specifics, the FBI did not raise its Homeland Security Advisory System threat level from yellow.

"Everything's in play here," said a floor broker. "When PPI came out it just rallied slightly. The big terror warning that something spectacular was going to happen may have also added some help."

Some were encouraged by gold's lack of follow-through on a midweek shakeout.

But the market is getting too overbought again and dealers were cautious, waiting to see how United Nations arms inspections play out after Iraq agreed to a disarmament plan under threat of severe consequences. The U.S. military is poised to go to war if Iraq does not come completely clean.

The CFTC Commitments of Traders report released after the close showed the net speculative long position ballooned to 36,907 contracts from 19,985 in the week ending Tuesday. Open interest increased to 174,682 from 152,269 lots.

December silver <0#SI:> rose 1.3 cents to $4.575 an ounce, trading $4.535 to $4.59 on turnover of 8,000 lots. Spot silver closed at $4.56/58, up from $4.55/57 late Thursday. It fixed at $4.55 an ounce.

The net noncommercial long in silver rose to 14,809 contracts from 6,180 contracts last week.

NYMEX January platinum <0#PL:> broke up to a contract high at $600 an ounce on forecasts that 2002 would be another year of record demand for the metal, used in jewelry and automobile catalytic converters.

It ended up $11.80 to $598.10 an ounce. Spot platinum was fixed at $602 early in London, its highest since May 2001. It was last quoted $600/605.

December palladium <0#PA:> slipped 70 cents to $292.10 an ounce. Spot palladium was last indicated at $288/298.