SAN FRANCISCO (AFX) -- Gold futures closed above $408 an ounce Thursday, their highest level in nearly three months, with a decline in the broader stock market, weakness in the U.S. dollar and growing concerns over terrorist attacks luring investors back to the metal. "Continued fears that the U.S. economic growth momentum is slowing, plus the interest rate deferential between the U.S. and foreign countries will continually put pressure on the dollar against most of the major currencies," said John Person, head analyst at Infinity Brokerage Services. And "some still feel that the risks of inflation still present a concern, so this is another reason why gold has proved to be a true market favorite among long term investors," he said. Gold for August delivery rose $5.50 to close at $408.20 an ounce on the New York Mercantile Exchange. Earlier, it traded as high as $409.60. Prices haven't closed or traded at levels this high since April 13. Homeland Security Secretary Tom Ridge said the Al-Qaida terrorist network is determined to attack the U.S. before the November presidential election, adding more fuel to gold's rally Thursday. U.S. stocks also lost ground amid disappointment over quarterly results from Alcoa and Yahoo and weak June same-store sales from a number of retailers. "If we begin to see the short side of the market unravel along with the continued and growing buying interest in gold, we could see a $425 gold price in the offing soon," said Kevin Kerr, a senior trader at Kwest International.. But for prices to push past $412, it "will likely take another serious world event," he said. "There is no doubt ... that the last two days lay the groundwork for a significantly higher gold price, and these levels are clearly pivotal to such a move," said Kerr. Also on Nymex, the September silver contract rose 31 cents, or 5.1 percent, to close at $6.435 an ounce, October platinum climbed $14.60 to end at $805.50 an ounce, and September palladium rose to $226.95 an ounce, up $1.05. However, September copper shed 0.4 cent to close at $1.251 per pound, following a 3 percent rally on Wednesday. Tracking inventories, copper supplies were down 723 short tons at 92,940 short tons as of late Wednesday, according to Nymex. Silver stocks were down 21,472 troy ounces at 118.3 million troy ounces while gold inventories stood at 4.4 million troy ounces, down 482 troy ounces from the previous day. Mining shares move higher On the equities side, shares of major metals companies closed higher, with stock market investors seeking out a hedge against losses. Two sector-trackers for the mining industry closed at their highest levels since mid-April. The Philadelphia Gold and Silver Index rose by 1.3 percent to end at 91.34, its highest closing level since April 19, and the CBOE Gold Index added 1.7 percent to close at 82.27, its loftiest level since April 12. The Amex Gold Bugs Index ended at 200.94, up 1.4 percent at its highest level since May 27. Shares of Idaho-based Coeur d'Alene Mines closed up 13 cents at $4.11. Iamgold's rejection Tuesday of a merger deal with Wheaton River Minerals helps clear the way for Coeur to pursue its offer to buy Wheaton. Shares of Bema Gold were among the few decliners among the metals miners. The stock fell 9 cents, or 3.2 percent, to close at $2.73. Placer Dome Gold said the Cerro Casale gold and silver project in Chile isn't financeable under the shareholders' agreement. The project is owned by Compania Minera Casale (CMC), which is indirectly owned by Placer, Bema, and Arizona Star Resource . Earlier this year, Placer updated the capital required for the project to $1.65 billion, according to Merrill Lynch. If the project was financeable, Placer would have to arrange the first $1.3 billion to maintain its 51 percent share in CMC, Merrill Lynch said. Placer shares closed up 7 cents at $17.13.
