updated from 12:36 p.m.

News that the U.S. economy grew at a somewhat faster clip in the second-quarter than previously thought helped launch gold prices higher Wednesday.

The Commerce Department's Wednesday morning announcement that the U.S. economy grew at an annualized 2.9% rate during the second quarter, compared with the previously reported 2.5%, reignited fear that there may still be some inflationary pressures in the economy.

Some gold traders are concerned the

Federal Reserve

, which recently decided not to raise interest rates again, may have turned too dovish when it comes to keeping a lid on inflation. That sent gold futures higher, with contracts for December delivery closing up $7 at $626 an ounce on the Comex division of the New York Mercantile Exchange.

Investors often buy gold as a hedge against a rising prices and inflation.

Oil, which is often seen a driver of inflation, edged slightly higher by 34 cents to $70.05 a barrel. But the gain was minimal in light of the recent big selloff in oil prices.

The two popular gold bullion exchange-traded funds,

streetTRACKS Gold Shares

(GLD) - Get Report

and

iShares COMEX Gold Trust

(IAU) - Get Report

, also both were trading higher.

One of the top-performing precious metals stocks was South Africa's

Gold Fields

(GFI) - Get Report

, rising 1.6%.

The rosier economic news also sent the dollar up modestly, buying 117.13 yen up from 116.66 yen late Tuesday. The dollar also gained ground on the euro, trading at $1.2836 vs. $1.2826.

"Although the Fed stopped raising rates, there still are concerns about inflation," says Carlos Sanchez, an analyst with CPM Group, a specialty commodity consulting firm.

Sanchez expects trading to remain light until Labor Day but to pick up next week. He believes traders to begin focusing more on the health of the economy after the long holiday weekend.

"When they get back they'll realize that things aren't that great with the economy, with inflationary pressures and the Iran situation and an election in November and possibly more hurricanes," says Sanchez.

But Andrew Leyland, a metals analyst with London-based Metal Bulletin Research, sees the indecision in the gold market as an opportunity for investors.

"Gold prices are trading in a triangle, which suggests market indecision," says Leyland, in a research note. He advises investors to "look at any weakness as providing a better buying opportunity."

Outside of the gold market, the big news was in the base metals world, where Russia's

RUSAL

and

SUAL

will combine with a portion of Swiss firm

Glencore

to form the world's largest aluminum producer. The deal will put the Russian company ahead of U.S.-based producer

Alcoa

(AA) - Get Report

and Canada's

Alcan

(AL) - Get Report

. Alcan and Alcoa were both losing, down 0.9% and 1.3% respectively in afternoon trading.

After an initial rally, copper prices were tumbling with December contracts closing down 3.2 cents at $3.355 a pound on the Comex after

Reuters

reported workers may be close to ending a strike at Chile's Escondida mine. The walkout, which started August 7, has kept production of concentrated copper ore at half the usual level.

Copper miner

Phelps Dodge

( PD) was down 0.3% recently, with falling metal prices only adding to the woes of a stock that has been dogged by investor dissatisfaction with the company's proposed merger with nickel company

Inco

(N)

.

Meanwhile, Brazilian rival

Companhia Vale do Rio Doce

(RIO) - Get Report

, also keen to marry Inco, was gaining ground, up 1.1%.

Gaining more than most in the base metals complex was London-based miner

Anglo American

( AAUK), higher by 1.9%.