Daily Gold Update

Source: CBS.Marketwatch

New York— Gold futures continued their bullish run Monday morning despite a higher dollar, as traders who had anticipated further price declines were forced to cover their short positions.

At last check, gold for August delivery rose 80 cents to stand at $430.10 an ounce on the New York Mercantile Exchange. The contract touched an intraday high of $431.80 earlier in the day, the highest level since May 8.

"Gold's ability to resist the sharp rise in the U.S. dollar is causing both a short covering rally and new fresh long positions to be added," Peter Grandich, strategist at Grandich Letter.

In the currency market, the dollar struck a nine-month high against the euro early Monday, benefiting from hopes for more U.S. rate increases and a hint from a European Central Bank official that the ECB could cut its rates.

Gold posted solid gains last week, advancing 0.9% to close at a one-month high despite the dollar's rally against its major counterparts.

Some traders said the recent decoupling of gold and currencies also showed gold's traditional status as a safe haven has returned to favor as inflation concerns are creeping back on investors' radar screens.

Analysts said the continued rally in gold was also driven by news over the weekend that G8 countries had reached agreement to write off the debt of the world's 18 poorest countries without using gold.

"A test of the old highs above $450 now seem a question of when, not if," said Grandich, who forecast gold is likely to hit an intraday high of $454 in the summer.

But James Moore of The BullionDesk.com said gold is open to another test lower.

He said further interesting moves are likely to be seen as the week progresses as a plethora of inflationary and manufacturing data are due for release this week.

Back on Nymex, other major metals opened mixed. July copper declined 0.85 cent to $1.5540 a pound. July silver dipped 0.30 cent to trade at $7.285. July platinum rose $4.40 to $876 an ounce while prices of September palladium held steady at $186.50 an ounce.

According to the latest inventories data as tracked by Nymex, copper fell to 18,772 short tons as of the close of business last week, down 340 short tons from the previous day. Silver stood at 103.77 million troy ounces, down 10,815 troy ounces. Gold inventories dropped 746 troy ounces to stand at 5.88 million troy ounces.

As for mining stocks, indexes tracking the sector eased off their highs, after earlier gaining with rising metals prices.