US gold up

Renewed buying interest from funds and a mining strike in major gold producer Peru propelled US gold futures to a solid finish on Thursday despite a higher dollar, as market sentiment turned more bullish ahead of the payrolls report.
Most-active gold for June delivery on the Comex division of the New York Mercantile Exchange settled up $9.30, or 1.4 percent, at $684.40 an ounce, trading in a range of $674.50 to $685.20.
"There seems to be some strong fund buying in the market today despite the weakness in the euro after this morning's weekly nonfarm payrolls number," said Carlos Perez-Santalla of Hudson River Futures from the Comex floor.
"I think the funds are buying here because we've seen some weakness in the last few trading sessions, and they feel that the greater opportunity is to the upside," he said.
Perez-Santalla said he noted that fund buying continued even though all the economic indicators had been bearish for the futures market. On Thursday, a government report showed that US business productivity grew more than expected in the first three months of 2007 but labour costs rose far less than forecast.
Meanwhile, the number of US workers filing new claims for jobless benefits fell unexpectedly by 21,000 to the lowest level since January. The dollar rose against the euro after the jobs and productivity reports.
A higher greenback makes dollar-denominated assets like gold more expensive for investors holding other currencies. Comex estimated final volume at 78,831 lots and options turnover at 10,236.
Turnover in the Chicago Board of Trade's electronically traded 100-oz gold contract was 30,389 lots as of 2:51 pm. Most of Thursday's gains came in within a 30-minute time span at around 11:00 am, coinciding with the closing of London's gold market.
Neal Ryan, director of economic research at Blanchard & Co said in note that the sudden surge in prices was related to physical and central bank sales in the London market. Ryan said that most of the physical trading in gold took place in the London market, and he noted that prices of gold futures usually rallied when physical sales ended with the close in the European markets.
George Gero, vice president at RBC Capital Markets Global Futures, said that a strike among Peru's miners boosted gold prices. "People started to get concerned.
The buy orders started to come in, and most of the sell-stops had been done, so there is nothing in the way," Gero said. Peruvian miners planned a march in Lima on Thursday to demand better working conditions as talks continued with the government to end a nation-wide mining strike, in its fourth day.
Metals markets were watching the strike because Peru is among the world's top two silver producers and is the No 3 copper and zinc miner, as well as the No 5 gold producer. Spot gold was quoted at $681.10/1.60 an ounce, higher than a late quote of $673.00/3.50 in New York on Wednesday. London's afternoon gold fix was $674.20.
In mining news, Gold Fields Ltd, the world's fourth biggest gold producer, posted lower-than-expected third-quarter adjusted earnings per share and forecast marginal growth in output in the current quarter, weakening its shares.
Barrack Gold Corp chairman and founder Peter Munk said the world's No 1 gold miner may consider expanding further into other non-gold precious or base metals production if its share price continues to underperform.
On Friday, investors will take their cue from the US payrolls report, which often sets direction to the dollar, which in turn influences gold. Comex July silver closed up 17.50 cents, or 1.3 percent, at $13.510 an ounce, traded from $13.300 to $13.560.
Spot silver was quoted at $13.37/3.40 versus $13.21/3.24 late on Wednesday. Silver was fixed at $13.33 in London. July platinum finished up $11.70 at $1,310.80 an ounce. Spot platinum fetched $1,295.00/1,300.00. June palladium ended up $1.55 at $376.50 an ounce. Spot palladium was quoted at $369.00/373.00.