(AFX UK Focus) 2004-08-18 01:36 GMT: RPT Gold futures mark...

(AFX UK Focus) 2004-08-18 01:36 GMT:
RPT Gold futures mark three-session rally of more than $10 - UPDATE



SAN FRANCISCO (AFX) - Gold futures climbed to their highest level in a month Tuesday as rising oil prices and easing concerns about inflation and a strong US dollar sparked investment demand.

The current rally in the gold futures contract has totaled more than 10 usd an ounce over the last three sessions.

There has "been a remarkable level of demand from Asia, and recently growing demand from the Middle East," said Brien Lundin, editor of Gold Newsletter. "Some of this new buying appears to be directly tied to the rising price of oil, and the profits being realized in the oil-producing nations of the region."

Profits made through selling oil in dollars are "finding a home in Treasuries and somewhat in gold," noted John Person, head analyst at Infinity Brokerage Services.

Against this backdrop, gold for December delivery closed at 406.70 usd an ounce on the New York Mercantile Exchange, up 1.50 usd. It has gained 10.10 usd in all in the three sessions.

"While the market will remain volatile, it is likely that a new attack on 430 usd is at hand," said Lundin.

Economic data released Tuesday -- on housing starts and inflation at the retail level -- also served as a key driver for gold. "The latest round of economic data to come from the US ... again proved unfriendly for the greenback, with the figures suggesting growth in the US was slowing," said James Moore, analyst at TheBullionDesk.com in London.

US consumer prices fell a seasonally adjusted 0.1 pct in July, the Labor Department said.

In addition, US homebuilders started homes at a seasonally-adjusted annual rate of 1.978 mln in July, the Commerce Department said. This easily beat economists' expectations.

Peter Grandich, editor of The Grandich Letter, an investment advisory publication, said the data "continue to suggest moderate growth at best, which is a net negative to the overblown fears that the US dollar would rise sharply and be bad for gold."

"Strong physical buying on major declines has allowed a very strong base under 400 usd to be formed," he said, adding that "most of the ingredients are now in place for a retest of the highs in the 435 usd area before year's end, and a move to 500 usd in 2005."

From here, Infinity's Person sees the Federal Reserve "on hold from raising rates aggressively with a steady momentum for economic growth," he said.

Other metals futures ended mixed, with silver, platinum and copper lower, but palladium closing higher.

September silver shed 0.7 cent to close at 6.73 usd an ounce, while October platinum fell 3.80 usd to 879.40 usd an ounce after climbing to a four-month high in the previous session, and September copper closed at 1.3075 usd per pound, down 0.8 cent. September palladium added 1.65 usd to end at 218.65 usd per ounce.

Tracking inventories, copper supplies were down 672 short tons at 70,402 short tons as of late Monday, according to Nymex. Silver stocks were up 1.98 million troy ounces at 112.2 mln, while gold inventories stood at 4.71 mln troy ounces, down 899 troy ounces from the previous day.

In equities, metals shares turned higher again, extending a three-session winning streak.

"Gold stocks 'always' lead the gold itself," said John Stafford, editor of Stafford's Investment Strategy Letter. And the "big money has been quietly accumulating the gold and the big gold stocks for months," he said.

Tracking the sector as whole, the Philadelphia Gold and Silver Index rose 0.2 pct to close at 89.85, led by Freeport-McMoran Copper and Gold, shares of which climbed more than 2 pct.

The CBOE Gold Index rose 0.2 pct to close at 80.28, and the Amex Gold Bugs Index closed at 194.76, up 0.1 pct.


Defying the overall strength in the sector, shares of Harmony Gold Mining fell 2 pct and Durban Deep's stock dropped 4.2 pct.


Shares of the South African miners have made hefty gains in the last three sessions following weakness in the rand in the wake of a surprise 50 basis point cut in the country's key interest rates on Aug 12.

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