Weak Data Hit Dollar, Aid Gold

Updated from 11:35 a.m. EST

Poor housing data undermined the dollar Friday, helping gold recover from an underwater start.

Gold for December delivery closed up 80 cents at $622.50 an ounce on the Comex division of the New York Mercantile Exchange, having dipped to an intraday low of $614.50. Open interest for the December contract slipped to 14.8 million ounces, from 15 million Thursday, with interest in the February contract unchanged at 9 million ounces. February-dated gold, which will takeover as the benchmark contract shortly, closed at $628.70, up 80 cents also.

The exchange-traded funds which hold the bullion, streetTracks Gold Shares and iShares Comex Gold Trust(IAU Quote), were gaining also, each up about 0.6% recently.

Sparking the rally was the Commerce Department's report that October housing starts totaled 1.486 million, well below consensus forecasts of 1.68 million and down dramatically from a revised figure of 1.74 million in September. October saw 1.535 million building permits issued, lower than estimates of 1.625 million and down from 1.638 million in September.

The weak statistics sent the greenback, which tends to move inversely with the price of gold, skidding as currency traders factored in a more broadly weakening economy. One dollar was recently buying 117.725 yen, down from 118.22 yen late Thursday. It was also losing against the euro, which was trading at $1.2826 compared with $1.2796 previously.

"This [housing] market remains weak," says Phillip Neuhart, an economist at Wachovia in Charlotte, although he notes that the Commerce Department statistics may be a low-water mark in terms of actual starts, but the weakness could continue through 2007. "That means we might see short-term rises [in building activity] but still be very, very weak."