Daily Gold Update

Source: Myra P. Saefong, CBS.MarketWatch.com

San Francisco— Gold futures closed Tuesday near the session's high as the euro climbed to nearly another all-time record level against the U.S. dollar.

The strength spilled into other areas of the metals market. Copper climbed closer to an eight-year high and metals mining shares recovered from declines in the previous session.

Gold for April delivery traded as high as $417 an ounce on the New York Mercantile Exchange. That's just $1 under the session peak from Friday, which was a one-month high. The contract closed at $416.50 an ounce, up $5.70.

"The previous 'flash in the pan' gold rallies over the last several years lacked any sustained physical buying, especially when prices would increase by $10 or $20 dollars in a short period," said Peter Grandich, editor of investment publication, The Grandich Letter, in a note to readers.

But "the fact that prices held of late, despite speculative interest declining in the futures market, is the most bullish factor going for those of us who think $500 gold is only a question of when, not if," he said.

For now, the gold market will "rightfully" remain focused on the dollar vs. the euro, he said.

"Expect gold to trade up and down with the rise and fall of these currencies, but the inevitable number one factor for a sustained run to $500 is the willingness of investors, and users of gold commercially, to continue purchasing gold in significant quantities in the physical market," he said.

Grandich added: "There's nothing on the horizon to suggest they won't."

The euro rose sharply against the dollar on Tuesday, nearing a test of its all-time high vs. the U.S. currency as the markets gained courage the European Central Bank may not be prepared to intervene and stem the dollar's weakness.

Other metals futures strengthened as well, with copper prices leading the way.

"The entire metals complex is higher … especially the base and industrial metal complex," said John Person, head financial analyst at Infinity Brokerage Services.

March copper rose 5.65 cents, or 4.5 percent, to close at $1.30 per pound. Earlier, it reached a high of $1.313, the highest futures level since May of 1996 with traders expecting demand for the industrial metal to continue to grow.

"Several factors are leading the price advance for copper," said John Person, head financial analyst at Infinity Brokerage Services. The workers strike at the copper mine operated by BHP Billiton in Chile has "slowed available supplies," and demand from China has been on the rise, he said.

"China has been an aggressive buyer," said Person, partly due to demand stemming from Beijing's new Olympic site as China is "building an Olympic city to 'beat all'."