Comex gold advanced above the $400 an ounce mark on Friday on the back of a blow-out in the US trade deficit to a record in June, which convinced investors that the dollar remained too expensive to make US exports competitive.
Comex December gold settled up $4.60 at $401.20 an ounce. It rose from an early low at $394.60 to $402 after the Commerce Department, kicking off a data-heavy, said that the US export/import gap expanded to $55.82 billion from Mays revised $46.88 billion shortfall.
Wall Street had been looking for the trade deficit to widen slightly to $47.00 billion. Estimated volume was a moderate 40,000 contract. Activity was subdued by August holidays.
Gold watchers like Chip Hansin, chief domestic strategist at Euro Pacific Capital, and a brokerage in Newport Beach, California Beach. Said the impulse was to buy the yellow metal as a hard alternative to the troubled dollar.
"The trade deficit number shocked everybody, even the bears," Hansin said. "It really should pose the question: if a weak dollar policy is supposed to help us export our way out of this economic malaise, what the heck is going on?"
Dealers said the record run in oil prices, which hit a new high above $46.50 per barrel on the New York Mercantile Exchange on Friday, aided the rally in gold, long considered a hedge against inflation.
The euro jumped more than $1 to $1.2372 as currency traders marked down the dollar.
Markets were little influenced by the simultaneous release of the July Producer Price Index, which rose just 0.1 percent on both the headline and core number, which excludes the volatile food and energy components.
But a weaker-than-expected August consumer sentiment survey from the University of Michigan further eroded support for the dollar. The yellow metal approached its high at $404 high from a week ago, a break of which would put gold back at levels last seen in late July.
Spot gold rose to $398.65/9.15 from yesterdays New York close at $393.95/4.45. The afternoon fix in London was $396.75. September silver rose 6.8 cents to $6.625 an ounce, having touched a high of $6.66 and a low of $6.49.
Spot silver went out quoted $6.59/62, up from $6.51/54 late on Thursday. The fix in London was at $6.48. "The economic data today did a number on the dollar, that's why we rallied," said James Quinn, commodities commentator at A.G. Edwards.
"You also had a 1.1 million (ounce) drop in Comex silver stocks, so that put some buying in the market." Nymex October platinum rose to a four-month high, closing up $15.60 at $864.20 an ounce. Spot platinum fetched $861.00/866.00.
September palladium gained 25 cents to $212 an ounce. Spot palladium was quoted at $209.00/213.00.