US gold futures moved higher early on Tuesday, rallying to a 6-week high, as funds continued buying on supportive US economic readings, and strong technical signals, physical demand and oil prices, traders said.
Gold teetered around unchanged at the start as New York traders returned from a Labour Day holiday that closed US markets on Monday. But COMEX gold later found strength from rallying prices in the London bullion market.
"It seems to be following along with silver as it firms. It's probably fund buying, because both of those markets are moving in tandem. That usually ends up being funds doing some buying," said one New York dealer.
Most-active gold for December delivery on the COMEX division of the New York Mercantile Exchange rose $5.90, or 0.87 percent, to $687.80 an ounce. The range extended up to $692, the loftiest level since July 25, from a session low of $680.10 an ounce.
Traders said excellent physical demand, solid technical chart signals, rising oil prices, and price gains in the US manufacturing report all contributed to gold's move up. They said they thought funds were in the market buying again Tuesday, as a follow-on to Friday's rally. Benchmark gold futures ended the Friday session with an $8 gain.
Though yellow metal prices already had begun moving up, one trader said they were pushed even higher by the US manufacturing and construction spending reports for their inflation and softer growth implications, respectively.
The Institute for Supply Management said its index of national factory activity eased to 52.9 in August, its lowest reading since March, from 53.8 in July. Further, it said the prices paid index, though easing to 63 in August from 65 in July, was still high.
US construction spending fell 0.4 percent in July, its biggest drop since January. It showed gains in commercial building failed to offset declines in home building.
Michael Metz, chief investment strategist at Oppenheimer & Co in New York, said the construction spending figures were "a distinct disappointment." "It suggests that one of the basic bulwarks of the economy going forward is now questionable. Non-residential construction is one of the basic positives that people had depended upon to provide some economic momentum, and now it becomes increasingly problematic," said Metz.
Elsewhere, crude oil prices climbed toward $75 a barrel, after predictions of more hurricanes in the Atlantic Ocean raised concern over potential oil and gas outages. Category 5 Hurricane Felix was expected to steer clear of oil and gas rigs in the Gulf of Mexico, but a top hurricane forecasting team at Colorado State University said it saw a busy storm season ahead. Initial strength in silver futures helped spur gold buying, traders said, as prices finally found levels definitively above $12 an ounce after Friday's buying spree.
COMEX December silver raced up 20.50 cents, or 1.64 percent, to $12.4350 an ounce, its highest since August 15. Spot silver rose to $12.27/12.30 an ounce, well above $12.02/12.06 an ounce at Friday's finish.
The London silver fix stood at $12.0950 per ounce. NYMEX October platinum rose $3.20, or 0.25 percent, to $1,274.80 an ounce. Spot platinum moved up to $1,269.10/1,276.10 an ounce. December palladium edged up 25 cents to $338 an ounce. Spot palladium firmed to $331.50/335.50.
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