Daily Gold Update

Source: MarketWatch

New York— Gold for August delivery closed up $3.20 at $654.40 an ounce on the New York Mercantile Exchange. The metal has gained 15.2% in the last month.

Other metals prices were mixed. Silver dropped 7 cents at $11.485 an ounce and platinum declined $3.60 at $1264.00 an ounce. Palladium rose $4.10 at $334.05 an ounce and copper added 1.15 cents at $3.6765 a pound.

The flaring of violence between Israel and Lebanon sent crude oil futures to record highs and gave a boost to gold, while the U.S. stock market tanked. Over the last few days, deadly train bombings in India's financial center Mumbai and political developments surrounding Iran's and North Korea's nuclear ambitions have fuelled demand for gold, the traditional safe-haven investment. Thursday's rise in gold, however, was modest compared to those of the previous days.

"Record oil prices have failed to propel gold and the other precious metal through the highs seen yesterday, as dollar-driven profit taking continues to cap the market," said James Moore of TheBullionDesk.com.

"For now, traders seem happy using rallies to lock in profits," Moore said. "However, given the rather unstable political picture globally, further safe-haven driven price spikes can't be ruled out."

Haven from conflict

On Thursday, Israel bombed Beirut's international airport and imposed an air and sea blockade on Lebanon in response to the kidnappings of two Israeli soldiers along the Israel-Lebanon border by Hezbollah on Wednesday. Raids on targets across southern Lebanon have killed at least 35 civilians, including children, the BBC reported. In response, Hezbollah militants fired rockets at the Israeli port city of Haifa, according to media reports.

"Israel's attack on Lebanon once again reveals just how fragile the situation in the Middle East really is and how isolated events can escalate into regional conflicts literally overnight," said Jon Nadler, an analyst at Kitco.com.

"Safe-haven buying of gold continues to play an important role in its current price equation, as much as some market critics would attempt to downplay the cause-and-effect factor or durability of crisis-induced rallies," he said.

Israel's offensive against Lebanon comes as it continues a separate operation in the Gaza Strip where another Israeli solider was taken hostage. About 71 Palestinians have been killed in that operation.

On Wednesday, the U.S. blamed Syria and Iran for the kidnappings of the two soldiers. Meanwhile, Russia condemned Israel for its "disproportionate use of force" and for causing damage to civilian infrastructure in the Palestinian territories and Lebanon.

Elsewhere in the Middle East, Iranian President Mahmoud Ahmadinejad said Thursday that his people "will not give up their right to exploit peaceful nuclear technology," the Associated Press reported.

Ahmadinejad's statement came after six of the major world powers agreed Wednesday to seek a United Nations Security Council resolution that would require Iran to stop uranium enrichment. The five permanent members of the Security Council and Germany will seek sanctions against Iran if it fails to comply with the resolution.

"Gold's recent rise back into positive pricing territory can be attributed to a number of factors, though chiefly the sharp rise in geopolitical uncertainty seen across the world," said Matthew Parry, an economist at Moody's Economy.com. "If it's not Israel, then seemingly it's Mumbai, North Korea, Nigeria or Iran."

Parry said that he remains bullish about gold prices in the short- to medium-term on the assumption that global political tensions are unlikely to ease any time soon.

Oil sets a record

Crude for August delivery climbed as high as $76.85 a barrel, an unprecedented peak in a front-month contract on the New York Mercantile Exchange. The contract was last up $1.70 at $76.65 a barrel. Front-month prices are trading 25% higher year-to date.

"It seems that oil is destined to hit $80 before the end of July and maybe even higher should tensions erupt abruptly," said Kevin Kerr, editor of Global Resources Trader, a newsletter published by MarketWatch. "The United Nations will have a full slate of activity trying to negotiate all of the hot spots on the planet right now."

Kitco's Nadler said: "Nobody wants global chaos, but how else can they currently look at the gold market but from the long side? If $76 or $80 oil is in the cards, then why not $680 or $700 gold?"