Comex gold trimmed some of its gains by the close on Tuesday, but with more soft US economic data expected for the rest of the week, traders said they looked for more dollar weakness and therefore gold strength.
"No question that dovish numbers that have been coming out, and are anticipated to come out, put a slant on a stronger euro and therefore stronger gold," said Bob Gottlieb, Head of Trading in New York for HSBC
December gold finished $1.50 firmer at $407.50 announce, in a higher trading range between $405.30 to $409.00. Spot gold was up at $404.95/405.70 late on Tuesday from $403.45/404.20 an ounce at Monday's close.
London's afternoon fix declined to $405.25 an ounce. Comex estimated final gold volume at 55,000 lots compared with turnover of 40,054 on Monday. Gottlieb and others said the gold selling of last week had abated and some players who had gotten short in the downdraft were coming back this week to cover those short positions.
"Yesterday we saw fresh long positions start to come back to the gold market. Between the stronger dollar and fresh buying coming to the market, that continued today," he said. The dollar weakened on Tuesday, weighed down by a report showing the US current account gap ballooned by more than analysts' forecasts.
"The retail sales and current account deficit came out weak and that sparked the euro and we got buying in the gold, safe-haven buying. So, most people who got stopped out recently are looking to get back in," said one gold broker.
The Commerce Department reported that the US current account deficit exploded to a record $166.18 billion in the second quarter from an upwardly revised first-quarter gap of $147.16 billion.
At the same time, US retail sales slipped 0.3 percent in August from a 0.8 percent gain in July.
Excluding auto sales the data rose 0.2 percent, less than July's 0.3 percent gain. One analyst said there was no way to spin on Tuesday's data as good news for the dollar, with retail sales weaker than expected and the trade deficit at an all-time record.
Anticipation of weak US economic statistics later in the week should continue to undermine the dollar and help gold.
A weak dollar offers a currency advantage to investors holding dollar-denominated assets like gold.
Also, weaker economic reports could Reigate worries about US growth and spark a desire for safe-haven investments like gold. December silver was up 1.50 cents to close at $6.23 an ounce in a $6.21 to $6.31 range.
Volume was 10,000 lots. Spot silver was higher at $6.18/6.21 an ounce than $6.16/6.19 an ounce at Monday's New York close. The daily fix was $6.19 an ounce. October platinum rose $4.30 to end at $848.10 an ounce.
Spot increased to $843.00/848.00 an ounce. December palladium was up $1.75 to $212.30 an ounce. Spot palladium was quoted at $207.50/213.50 an ounce.
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