July 23, 2009 / 3:02 PM / 10 years ago

Gold holds near six-week highs as dollar weakens

LONDON (Reuters) - Gold held near six-week highs on Thursday as the dollar weakened against the euro, boosting interest in hard assets like bullion, after U.S. stock markets rallied on better-than-expected home sales data.

Spot gold was bid at $954.90 an ounce at 1439 GMT, against $950.40 an ounce late in New York on Wednesday. Earlier it hit a peak of $956.50 an ounce, its highest since June 12.

U.S. gold futures for August delivery on the COMEX division of the New York Mercantile Exchange rose $1.80 to $955.10 an ounce.

“Dollar weakness is keeping (gold) higher,” said Pradeep Unni, senior analyst at Richcomm Global Services. “Almost all the recent momentum has come on the back of dollar weakness.”

The dollar initially trimmed losses against the euro in the wake of a report that showed sales of previously owned homes in the United States rose faster than expected in June, but later slipped as U.S. equity markets rose 1 percent.

The data prompted fresh gains in both U.S. and European stocks. The Dow Industrials index rose above 9,000 for the first time since January on an intraday basis.

World stocks stabilized near the previous session’s nine month high as forecast-beating company earnings reports fueled interest in assets seen as higher risk, such as equities, commodities and certain higher-yielding currencies.

Oil also jumped as traders were cheered by firmer equities and the above-consensus home sales data.

The market largely shrugged off a second daily outflow from the world’s largest gold ETF, New York’s SPDR Gold Trust, and ETF Securities’ smaller London-based gold fund, as interest shifted to other products, analysts said.

OFFSET

“It may be that outflows from things like the ETFs or the retail base are being offset by more buying of OTC- or futures-based (products),” said Calyon metals analyst Robin Bhar.

Jewelry demand also stayed weak. Indian buyers stayed away from the market as the weak dollar pushed local prices toward 15,000 rupees per ten grams.

On the supply side, Newmont Mining, the world’s second largest gold producer, released second-quarter results that missed analysts’ forecasts. The company also lowered its gold sales target for this year.

Among other precious metals, silver was at $13.77 an ounce against $13.68. In investment news, the ETFS Silver Trust said it had issued shares backed by physical silver to be traded on the New York Stock Exchange.

Platinum was at $1,178.50 an ounce against $1,172, while palladium was at $254.50 against $252.50.

Lonmin, the world’s number three platinum producer, said its full-year sales will miss its target, but added it was on track to deliver lower costs. Third quarter production eased 1 percent to 178,494 ounces.

Editing by James Jukwey

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