Daily Gold Update

Source: CBS.Marketwatch

New York— Gold futures rallied Thursday, extending the prior day's sharp advance with contracts continuing to benefit from the dollar's recent weakness, escalating violence in Iraq and higher energy prices.

The December gold contract ended up $8.40, or almost 2% higher, at $446.50 an ounce.

Peter Grandich, editor of the Grandich Letter, said gold futures continue to draw strength from the dollar's weakness. Gold, a traditional safe-haven investment, frequently trades in the opposite direction of the dollar.

In recent trades the dollar was down 0.6% at 110.04 yen as the euro rose 0.02% to $1.2457. The euro was supported in part by the European Central Bank's decision to leave base rates unchanged yet again at 2%.

The dollar is approaching some key technical levels and could drop considerably further if it breaks those levels, he said.

In addition, he predicted that the aftermath of Hurricane Katrina is likely to pressure the dollar further because the devastation in Gulf Coast states may persuade the Federal Reserve to back away from its current program of small, steady rate increases.

On Thursday dollar softness was linked to rising oil prices stemming from economic uncertainty as investors sorted reports about the severe destruction brought on by Katrina.

James Moore, editor of TheBullionDesk.com, said gold's rise on Wednesday and Thursday reflected "data-related pressure on the dollar, an increase in tension in Iraq, and ongoing price rises in the energy market."

"Traders will be looking to see if speculative longs decide to take advantage of the firmer gold price today and carry out some liquidation," Moore said.

Other metals were driven higher in gold's wake, with September silver futures rclosed up 18.5 cents at $6.966 an ounce and copper futures up 3.20 cents at $1.727 a pound.

The September palladium contract rose $2 to $183.95 an ounce.

The October platinum contract finished the session at $903.40 an ounce, up $8.90, or nearly 1%, from the opening.