Jewelry Demand Drives Gold

Updated from 11:09 a.m. EDT

Renewed jewelry demand out of Asia and a rally in crude futures spurred gold prices higher Friday.

"Imports into India have popped up over the past three to four weeks," says Jessica Cross, CEO of Virtual Metals, a London-based specialty consulting firm. "And now it's working its way through the system."

Cross also classifies the jump as part of a rebound that is correcting the recent slide which overshot on the downside. Spot bullion prices fell from over $650 an ounce on Aug. 10 to under $570 late last week.

Contracts for December delivery of gold closed up $12.40 at $592.70 an ounce on the Comex division of the New York Mercantile Exchange. Gold was trading higher in tandem with crude, which was up sharply on news of production cuts in Norway.

Shares of the exchange-traded funds that hold the metal were climbing also; iShares Comex Gold Trust (IAU) and streetTracks Gold Shares (GLD) were jumping 1.8%.

Other observers note the choppy conditions in the bullion market of late.

"This is a market that is now bigger than its dealers," says Paul Tustain, CEO of BullionVault.com a retail-focused Web site based in the U.K. "On days when you get serious investor interest in gold, the existing firms can't deal with the volume, and that causes volatility."

Gold's Friday rally may have been capped by a modestly stronger U.S. dollar, which was gaining on the back of favorable economic data. The Commerce Department reported declines in retail sales for September of 0.4%, compared with an expected increase of 0.2%. But when the falling cost of gasoline was factored out, sales actually grew 0.6%.