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Dollar Weakness Bolsters Gold

Simon Constable

Disappointing economic news and signals from Federal Reserve Chairman Ben Bernanke that rate hikes aren't imminent weakened the dollar Wednesday, sending gold higher.

Contracts for April delivery of gold closed up $3.50 at $672 an ounce on the Comex division of the Nymex.

The bullion exchange-traded funds were getting a lift also, with streetTracks Gold Shares (GLD Quote) up 0.6% and iShares Comex Gold Trust (IAU Quote) ahead similarly. Both ETFs hold bars of gold.

New reports on retail sales and business inventories, both from the Commerce Department, came in below consensus expectations.

"The data encouraged traders to unwind dollar positions," writes Jon Nadler, an analyst at the Montreal-based bullion dealer Kitco, in a research brief. "The euro, yen and gold were the most visible beneficiaries."

One dollar would recently buy 120.78 yen, down from 121.17 late Tuesday. The euro was trading at $1.3124, up from $1.3037 previously. The value of the U.S. currency and that of gold tend to move in opposite directions.

Also affecting the market was the start of testimony by Fed Chief Ben Bernanke to the Senate Banking Committee. By midday, foreign-exchange traders were interpreting his comments as dovish, adding further downward pressure on the greenback.

In the official sector, the European Central bank says it sold 70 million euros of gold and receivables last week, or about 4.3 metric tons.

Turning to the gold patch, the Market Vectors Gold Miners(GDX Quote) ETF, which tracks a basket of precious-metals miners, was rallying 1.5% recently.

Shares of Eldorado Gold(EGO Quote) were rising 2.7%, while Golden Star Resources(GSS Quote) was up 3.2%.

Agnico-Eagle Mines(AEM Quote) saw its shares slip 1.8% after the company announced it would acquire 100% of Cumberland Resources(CLG Quote) in an all-stock deal. Shares of Cumberland were jumping more than 25% in recent action.

As for base metals, March-dated copper contracts were down a penny at $2.58 a pound, and the May contract closed at $2.59, also off a penny. The open interest in the May-dated futures contract now exceeds that of the March one, and so the latter date becomes the benchmark.

Shares of miner Southern Copper(PCU Quote) were adding 1.1% at about $68. Notably, the stock is up from around $50 at the beginning of the year.