US gold futures closed at a 16-1/4-year high on Tuesday as the market extended its bull move above $440 an ounce, aided by a weak dollar that made the metal cheaper to buy for overseas investors. Silver rode gold's coattails higher, while platinum fell after dealers digested a report from precious metals refiner Johnson Matthey forecasting a platinum surplus next year.
December delivery gold on the New York Mercantile Exchange's COMEX division ended at $440.50 an ounce, its highest close since July 1988, and up $3.20 on the day, after moving between $436.20 and a life-of-contract high of $441.40.
Estimated turnover was a brisk 75,000 contracts.
Prices closed higher for the third straight session, with bank buying helping gold stay atop $440 an ounce- a level that it previously had trouble holding, said trading sources.
Meanwhile, the dollar slipped versus the euro to near its all-time low as a generally positive US capital flows report did little to ease fears about the huge US trade deficit.
"The quality of the data was less favourable to the dollar, and that's what gave gold a boost," said Refco analyst Tom Boustead.
US net inflows of capital totalled $63.4 billion in September, after an upwardly revised $59.9 billion in August.
The weak dollar makes it cheaper for foreign currency investors to buy bullion.
The market has set its sights on $450 for gold, expecting that the dollar will keep sliding on perceptions that the second Bush administration will tolerate a weakening currency to make US exports more competitive, even as they profess to maintain a strong dollar policy.
The almost-six-year-old European currency hit a lifetime high at $1.3005 on Thursday.
"The important thing (for gold) might be right now to see how the euro is closing - to see if it can break firmly above the $1.30 mark," said Boustead.
In other data that initially supported gold on Tuesday, US producer prices shot up 1.7 percent last month, the largest increase since January 1990, and above expectations for a 0.5 percent jump. Subtracting food and energy prices, the PPI went up 0.3 percent.
Slipping oil prices have tempered some of the ardor for gold as store of value. Yet, funds appeared to have rotated some of the money they pulled out of oil futures back into gold and other commodities, market data has showed.
Spot gold last was worth $439.75/0.50, against an earlier 16-1/4-year high at $440.25 and Monday's New York close at $436.45/7.20. Tuesday's London afternoon fix was at $439.40.
December silver rose 2.0 cents to $7.592 an ounce, trading from $7.48 to $7.63. Spot was at $7.54/57, up from $7.53/56 previously. The fix in London was $7.5050.
January platinum fell $8.40 to $868.90 an ounce. Spot platinum traded down to $864/869.
December palladium rose $2.50 to $222 an ounce. Spot palladium stalled out at $215.00/221.00.