Dollar Decline Boosts Gold

Updated from 2:10 p.m. EST

Gold spiked Tuesday after strong economic data out of France boosted the euro against the U.S. dollar.

Contracts for February delivery of bullion tacked on $11.80 to close at $645.90 an ounce on the Comex division of the New York Mercantile Exchange. The PowerShares DB Gold(DGL Quote) exchange-traded fund, which tracks futures prices, gained 1.7%.

The bullion ETFs, streetTracks Gold Shares (GLD Quote) and iShares Comex Gold Trust (IAU Quote), climbed 2.4% and 2.3%, respectively.

"The French [consumer] data was a little better than expected, and maybe points the way to a further [European Central Bank] rate hike," says Jason Schenker, an economist at Wachovia in Charlotte, N.C. Statistics showed spending on manufactured goods grew 1.3% in December when compared to November, Bloomberg reports.

In addition, traders seem to be anticipating some further strength out of the British economy, he says.

As a result, the greenback was losing against the major currencies. One dollar would recently buy 121.53 yen, down from 121.64 late Monday. One euro would buy $1.3024, vs. $1.2948 previously. The pound was buying $1.983, up marginally from $1.98 a day earlier. The price of gold tends to move inversely with the dollar.

Further adding to the allure of gold was news that the U.S. is sending a second aircraft carrier group to the Persian Gulf in an effort to dampen Iranian nuclear ambitions, the AP reports.

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