Daily Gold Update

Source: MarketWatch

New York— Gold futures rallied Wednesday, soaring to their highest level in more than a month, as instability in India, Iran and North Korea drove safe-haven demand.

Gold for August delivery was last up $9.80 at $652.80 an ounce on the New York Mercantile Exchange, having earlier risen to as high as $653.30, its loftiest level since May 30. On Tuesday, gold futures gained $17.

Gold's rally has been fuelled by Tuesday's deadly bombings of rush-hour commuter trains in Mumbai as well as by the lack of a breakthrough in the west's attempts to stop North Korea and Iran from developing nuclear weapons.

As long as there is no resolution in the crises in Iran, Iraq, Gaza, and North Korea, "gold will keep drawing safe-haven buyers under its protective wing," said Jon Nadler, an analyst at Kitco.com.

"The seasonal factors one could usually count on to slow the action in the trading pits are now taking a back seat to the anxieties created by aggravated world conditions," Nadler said.

Other metals prices also posted gains. Silver added 12 cents at $11.670 an ounce, platinum rose $23.0 to $1,277.0 an ounce and palladium was up $2.10 to $331.10 an ounce. Copper added 10.20 cents at $3.7370 a pound.

In India, the death toll from the train attacks rose to at least 180 people, while the injured are now estimated at more than 700, according to reports. Explosions ripped through seven commuter trains during rush hour in Mumbai Tuesday evening in a coordinated attack, for which no one has claimed responsibility at this point. India's one of the biggest buyers of physical gold and the train attacks prompted gold investors to buy the yellow metal for its safe-haven value.

James Moore of TheBullionDesk.com said that gold will trade in the $600-$650 range until "clearer direction comes from either the currencies or the broader geo-political situation."

Dale F. Doelling, chief market technician at Trends In Commodities, attributed the latest gains in gold prices to the underlying strength of the market rather than to the attacks in India.

"These events can cause brief periods of market volatility, but certainly this event alone will hardly have any long-term affect on the markets," Doelling said. "It will be interesting to see how much more is left in the current rally as the market has retraced about 50% of the decline and is back in overbought territory."

North Korea and Iran remain defiant

In another political development, the five permanent members of the United Nations Security Council and Germany are meeting Wednesday in Paris to discuss their next move regarding Iran's nuclear program. Iran said Tuesday it won't meet a mid-July deadline to respond to an incentive package that the six nations designed to deter the country from enriching uranium. The package proposed by the U.S., Russia, China, France, Germany and Britain offers trade and financial incentives as well as technical assistance in building a light-water nuclear reactor for civilian energy generation.

After a Tuesday meeting in Brussels with Javier Solana, the European Union high representative for foreign policy, Iran's chief negotiator said talks on his country's nuclear program will be "a long process," the Associated Press reported.

Besides Iran, western diplomats are also working hard to dissuade North Korea from building nuclear weapons, but so far there's no breakthrough in sight. The senior U.S. envoy to North Korea, Christopher Hill, said Wednesday that North Korea was not cooperating with diplomatic attempts to end its missile tests and to resume six-nation negotiations on its nuclear disarmament, AP reported.

Hill, the U.S. Assistant Secretary of State, spoke in Beijing after he met with the Chinese foreign minister to discuss Chinese efforts to lobby North Korea, which so far seemed to have made no progress.

Earlier this week, members of the United Nations Security Council delayed a vote on a Japanese resolution seeking to impose sanctions on North Korea in order to give a chance to China, North Korea's principal ally, to lobby the country back to the negotiating table. Japan, which feels particularly threatened by North Korean aggression, proposed the resolution after the country test-launched seven missiles last week.

China, together with Russia and South Korea, has expressed opposition to the Japanese resolution, while the U.S., Britain and France have indicated support.

On the supply side, gold inventories were unchanged at 8.03 million troy ounces as of late Tuesday, according to Nymex data. Silver supplies fell by 456,655 troy ounces to 101.9 million and copper supplies were flat at 7,796 short tons.