US gold futures gained at the open on Tuesday, then extended their advance after declines in both US retail sales and producer prices hit the dollar, traders said.
"We started stronger on a slightly weaker dollar and the dollar continues to weaken here on these (economic) numbers. Why gold is firmer and continues to stay firmer is because technically gold has more upside potential, aided by the weaker dollar," said one gold trader.
December gold at the COMEX division of the New York Mercantile Exchange was up $4.20 at $630.0 an ounce, trading from $623.20 to $630.40 an ounce. COMEX estimated 10 EST volume at 21,000 contracts, including 5,161 switches. Based on Tuesday's US economic readings, analysts said they thought there was little reason for the Federal Reserve to tighten credit.
"The way the numbers looked to me, the Fed will not be raising (interest) rates any time soon. The numbers translate to the Fed keeping rates stable, if not considering cutting them. And that would only boost gold as well as weaken the dollar," said one gold dealer.
Spot gold bullion was quoted at $626.40/7.40 an ounce, higher than Monday's late quote at $625.20/6.20. Bullion dealers fixed London's spot reference price at $623.40. COMEX December silver rose 9.50 cents to $12.98 an ounce. It traded between $12.8150 and $13.05. Spot silver was up at $12.95/3.02 from $12.86/2.93 an ounce. Tuesday's fix was at $12.85.
In platinum news, refiner Johnson Matthey said in its widely watched Interim Review that it forecast a swing in platinum prices between $980 and $1,200 an ounce in the next six months. It also said it saw a market deficit of just 20,000 ounces in 2006, against 40,000 ounces last year, and as much as 500,000 ounces in 2002. NYMEX January platinum went down $22.90 to $1,181. Spot platinum fetched $1,178/1,183 an ounce. December palladium fell $4.25 to $322.50 an ounce. Spot palladium last traded down to $320/325 an ounce.