Daily Gold Update

Source: MarketWatch

SAN FRANCISCO— Gold futures gained more than $7 an ounce Wednesday to touch their highest level in almost six weeks, buoyed by a rally in oil as well as persistent weakness in the U.S. dollar.

Gold reaction is a "combination of [Federal Reserve Chairman Ben] Bernanke's speech and the initial run in crude oil," said Burt Schlichter, director of trading at New World Trading.

The $670 level for the August gold contract was also an important technical level in the market, so "once that level was broken, the market experienced short covering and technical buying," he said in e-mailed comments.

Meanwhile, the dollar is "embarking on new lows as [the] Bernanke speech continues, which is another driving force," he said.

Gold for August delivery was last up $7.30, or 1.1%, at $663.20 an ounce on the New York Mercantile Exchange. Other metals prices traded higher as well.

Gold futures fell 40 cents an ounce on Tuesday.

Indeed, gold is being supported by Bernanke's speech "since inflation and employment data points were key concerns for the Fed," said Zachary Oxman, a senior trader at Wisdom Financial.

Core inflation should edge down a bit over the next year and a half, as inflation expectations remain contained, energy prices flatten out and pressures from the labor and product market diminish, Bernanke said Wednesday.

On growth, the Fed chairman said the economy should expand at a "moderate pace" over the second half of 2007, and "strengthen a bit" next year.

Another catalyst was investors moving funds into gold in safe-haven buying.

"Worries about subprime loans were reinforced after Bear Stearns said that two of its hedge funds that have invested in these loans were 'almost worthless,' " said Mark O'Byrne, director at Gold & Silver Investments Ltd., in a morning note.

The latest indications of hedge-fund troubles have the effect of "increasing speculation that investors are losing faith in the greenback," James Moore, analyst at TheBullionDesk.com, said in a research note.

The British pound touched a fresh 26-year high against the dollar Wednesday, and the greenback fell versus the euro and yen.

Meanwhile, the Labor Department reported that U.S. consumer prices increased a moderate 0.2% in June, with falling energy prices offsetting rising food prices.

In other metals action, September silver rose 2%, or 26.2 cents, to stand at $13.28 an ounce, October platinum added 1.3%, or $16.90, to $1,339.50 an ounce, and September palladium gained $2.95 to trade at $370.70 an ounce. September copper tacked on 1.4 cents to $3.5665 a pound.