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Dollar's Loss Is Gold's Gain

The metal makes another run at $600 as lackluster economic data weigh on the greenback.

Updated from 11:33 a.m. EDT

A weak dollar helped boost gold Thursday, enough to take it within a whisker of the psychologically important $600 an ounce level.

Economic data did little to shore up the greenback. The Commerce Department reported September sales of 1.075 million new homes compared to a forecast of 1.05 million.It marks the second month of increasing sales (August sales were 1.021 million) and a sign that the housing slowdown may be moderating. Still, the median sales price plummeted 9.7% over the past 12 months, the biggest drop since 1970.

The Commerce Department also reported a jump of 7.8% in durable goods orders in September, beating forecasts of a 2.3% increase.

The rise was mainly due, however, to some massive orders at aircraft manufacturer

Boeing

(BA) - Get Boeing Company Report

. Other sectors of the economy saw declining orders; excluding transportation, durable goods orders rose just 0.1%.

Currency traders focused on the bear case of a slowing economy, and marked down the greenback against the yen and the euro.

The dollar was recently buying 118.31 yen, down from 119.02 yen late Wednesday. It was also off compared to the euro, which was recently trading at $1.269 vs. $1.261 previously.

The currency weakness spurred a gold rally with December contracts jumping $9 to close at $599.80 an ounce on the Comex division of the New York Mercantile Exchange. The price reached an intraday high of $601 before easing back.

Bullion prices tend to move in the opposite direction to changes in the value of the U.S. dollar, which some believe will lose more, in line with less robust economic activity.

Shares of the bullion exchange-traded funds,

iShares Comex Gold Trust

(IAU) - Get iShares Gold Trust Report

and

TheStreet Recommends

streetTracks Gold Shares

(GLD) - Get SPDR Gold Trust Report

, were gaining about 0.8% recently.

"I think that the dollar is weakening in general on the back the

Fed

comments

Wednesday that the economy is moderating, implying below-trend growth," says Jason Schenker, an economist at Wachovia. "The economic data this morning hasn't had a huge impact."

Schenker sees the continued softening of the dollar going forward as the Fed will eventually ease, while other major central banks remain on hold or hike rates. Foreign exchange traders tend to pick currencies that have higher expected returns.

He is forecasting a $606-an-ounce average price for the yellow metal in 2007.

Chart watchers will be paying particularly close attention to how the rally fares if the price gets above the $600 level.

"I see significant resistance points at the $605-$612 level for gold," says Neal Ryan, director of economic research at New Orleans-based coin dealer Blanchard. "If we can reach and hold those levels, then we could see a significant price rise thereafter."

In the gold patch, South African miner

Gold Fields

(GFI) - Get Gold Fields Limited Sponsored ADR Report

reported September quarter earnings of 20 cents a share, up from 2 cents in the same period a year ago.

Analysts had been expecting income of 23 cents and Gold Field's shares were quickly marked down, off 1.3% in recent action.

Elsewhere, Toronto-based

Agnico Eagle Mines

(AEM) - Get Agnico Eagle Mines Limited Report

reported third-quarter earnings of 38 cents a share vs. 2 cents a share in the same period a year before. Analysts had been expecting 28 cents a share and the news quickly led investors to bid up the stock, higher by 2.7% recently.

RBC Capital Markets reiterated its underperform rating on

Meridian Gold

(MDG)

, but upped the stock price target on the miner to $30 a share from $28. The stock was recently up 0.7% to $24.65.

In base metals, Comex December-dated copper contracts closed down 0.45 cents at $3.40 a pound, despite news from

Bloomberg

that workers at Chile's

Codelco

had rejected management overtures to start contract talks ahead of schedule.

Management and workers are set to discuss renewing the current contract, which expires at the end of the year, by mid-November. Failure to reach agreement could lead to supply disruptions.