U.S. gold rallies above $670/oz, ETF inflow seen

NEW YORK, July 12 (Reuters) - Soaring oil prices and a
slumping dollar sent U.S. gold futures to a five-week high
early on Thursday, as the precious metal's recent rally led to
a sharp inflow into the largest bullion exchange-traded fund.

At 10:34 a.m. EDT (1434 GMT), most-active gold for August
delivery GCQ7 on the COMEX division of the New York
Mercantile Exchange jumped $8.10, or 1.2 percent, to $670.20 an
ounce. Earlier, it surged to a session-peak of $671, the
loftiest level since June 7. It hit a session low of $661.80.

Leonard Kaplan, president of Prospector Asset Management,
said gold's strength was related to the fact that oil prices
were "screaming up." Kaplan said gold's rally on Thursday
looked very strong.

U.S. oil futures CLc1 rose 96 cents, or 1.3 percent, to
$73.52 a barrel, helped by increased flows of fund money. Gold
is seen as a hedge against oil-led inflation.

Gold futures have soared nearly $20, or 3 percent, from
last Thursday's close of $650.60. Bullion's rise prompted
investors to increase holdings in StreetTRACKS Gold Shares
GLD.N, the No. 1 gold ETF.

Most recent data showed bullion held by StreetTRACKS
XAUEXT-NYS-TT increased to 481.15 tonnes, sharply higher than
464.22 tonnes reported last Thursday.

DOLLAR FALLING VS EURO

The dollar dropped to a record low against the euro as
troubles in the U.S. mortgage and credit markets continued to
dampen the currency's appeal.

"As long as the euro-dollar keeps making new highs, then
we'll keep following it. We will keep going higher," Joseph
Guzzardi said from the COMEX trading floor.

Guzzardi said that decent buying by funds earlier in the
week helped propel gold prices to the current levels, but he
also cautioned that August futures could turn around in the
next couple of days and could head below $660, if the dollar
retraced its losses.

In mining news, South Africa's Solidarity Union agreed to
call off a strike by its metal and engineering workers as it
entered its third day on Wednesday, after employers raised
their wage offer.

But the larger National Union of Metal Workers said it had
not yet decided to end its participation in the strike, which
has involved around 260,000 workers at nearly 9,000 companies.
[ID:nL11823075]

South African gold output rose 1.3 percent in volume terms
while overall minerals production increased 0.8 percent in May,
compared with the same month last year, official data showed on
Thursday.

South Africa accounts for around 12 percent of the world's
gold output and is by far the biggest producer of platinum.

Spot gold XAU= was quoted at $667.80/668.40 an ounce,
sharply higher than $660.30/660.90 late Wednesday. The London
afternoon gold fix was at $667.25 an ounce.

NYMEX October platinum PLV7 gained $11.90 to $1,328 an
ounce. Spot platinum XPT= fetched $1,312/1,319 an ounce.

September palladium PAU7 edged up 95 cents to $372.40 an
ounce. Spot palladium XPD= was quoted at $367.40/371.40 an
ounce.

COMEX September silver SIU7 jumped 20.0 cents, or 1.5
percent, at $13.175 an ounce, trading between $12.955 and
$13.190.

Spot silver XAG= was quoted at $13.05/13.08 an ounce,
compared with $12.87/12.90 late Wednesday. London silver was
fixed at $12.950 an ounce.