Daily Gold Update

Source: Marketwatch.com

San Francisco— Gold futures closed $11 higher Thursday on the heels of the previous session's $36 retreat to a one-month low, as a smaller-than-expected revision to U.S. gross domestic product estimates weighed on the dollar and prompted investors to take refuge in the precious metal.

The dollar fell against the yen and euro after a revision of U.S. gross domestic product growth came in smaller than expected.

The Commerce Department said the economy grew at a 5.3% annual rate in the first quarter, faster than the 4.8% estimated a month ago, but smaller than the revision to 5.6% that economists were expecting.

"When taken together, the GDP numbers and [Wednesday's] plunge in durable-goods orders contributed to the dollar's decline," said Jon Nadler, an investment products analyst at bullion dealers Kitco.com.

"A reasonably good case appears to be shaping up in favor of a pause in interest-rate rises as we head into June," Nadler said.

Against this backdrop, gold for June delivery tacked on $11 to finish at $648.50 an ounce on the New York Mercantile Exchange. The contract dropped $36.20, or 5.4%, Wednesday to close at a one-month low of $637.50.

Meanwhile, adding pressure to the dollar Thursday were upbeat Japanese economic data and figures from several countries indicating less of a willingness to hold dollars in their reserves and perhaps more gold, said Nadler.

He used Qatar and Sweden as examples of countries less willing to hold dollars, and said countries such as Russia and China were more willing to add more gold to their reserves.

"The U.S. economy could indeed be heading toward a stagflation scenario, as housing shows a cooling trend (consumer spending thus cannot be far behind) and inflation shows a stubborn tendency to keep showing up as the uninvited guest," said Nadler.

Given that, "bargain hunters of gold and other precious metals are beginning to be sighted more frequently as perceptions grow that the correction in prices may be drawing to a close in coming days," he said.

Still, "the possibility of additional waves of selling cannot be discounted," he said.

At the same time, "there is also an argument to be made in favor of stabilizing very near current levels and then resuming a (more moderate) pattern of higher values," he said.

Elsewhere in metals trading Thursday, copper futures closed almost 2% higher on the heels of Wednesday's more than 6% loss. July copper closed up 6.85 cents at $3.7075 a pound.

Meanwhile, July silver rose 8.5 cents to end at $12.60. July platinum added $9.90 to close at $1,295 an ounce after Wednesday's 2.8% loss. June palladium shed $2.75 to close at $352 an ounce.

On the supply side, inventories of copper fell 135 short tons to 10,536 as of late Wednesday, according to Nymex.

Gold inventories were unchanged at 7.80 million troy ounces, while silver inventories were at 113.7 million troy ounces, down 3.1 million troy ounces.

Indexes climb