Soft Dollar Buoying Gold

Contracts are adding $1 at $739.90 an ounce.
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Gold prices were trading slightly to the upside Friday as investors bet on continuing declines in the value of the U.S. dollar.

December-dated gold contracts were adding $1 at $739.90 an ounce in recent New York futures market action. Silver was up 3 cents at $13.65.

"With the dollar under pressure and with decent buying seen in nonfutures markets, there is the possibility for further gains in gold in the short term," writes John Reade, a precious metals strategist at UBS in London, in a research report.

The

streetTracks Gold Shares

(GLD) - Get Report

, the largest exchange-traded fund that holds inventories of bullion, serves as a prime example of the physical market demand for the metal. It has increased its metals holdings by about 10 tons, or $240 million, to 577 tons over the past week alone.

Historically, sustained rallies in the gold price have been strongly correlated with heavy demand for the metal by investors.

From the technical analysis perspective, the chart watchers remain resolutely bullish, believing that new all-time records are likely in the cards for the coming months. Still, most analysts are reluctant to pin down a definitive time frame due to the lack of historical chart formations at this level.

"The trend is up, fabulous and strong," says Aldolfo Rueda, a technical analyst at Natixis Bleichroeder in New York. "I think the next solid number is $900, but the short-term target is $830."

Among stocks, Merrill Lynch downgraded

Barrick Gold

(ABX)

and

Agnico-Eagle Mines

(AEM) - Get Report

to neutral from buy, and both stocks were down more than 1%.

CIBC World Markets dinged

Yamana Gold

(AUY) - Get Report

with a downgrade to a sector-perform rating from sector outperform and at the same time trimmed the stock price target to $14 a share from $16.

The shares were recently trading at $12.65, down 1 cent.

In other metals, copper prices were rising about 1.1% at $3.64 a pound. As for the agricultural products, wheat prices were ahead 9 cents at $8.59 a bushel, while coffee prices were down 2.4% at $1.30 a pound.