Updated from 12:17 p.m. ESTGold futures forged ahead Friday in concert with a more robust oil price. Contracts for February delivery of bullion closed up $8.30 at $636.40 an ounce on the Comex division of the Nymex. The exchange-traded funds that hold bars of gold, streetTracks Gold Shares ( GLD) and iShares Comex Gold Trust ( IAU), were following the futures prices in recent activity, both up 1.3%. "Gold is basically tracking the price oil," says Bernard Hunter, director of precious metals at ScotiaMocatta in Toronto. Crude oil for spot delivery was recently selling for $51.91 a barrel, up $1.43. Energy prices are seen as a key catalyst of inflation and many investors choose to purchase gold as a hedge against rising prices. Hunter says that the other key factor for gold is the strength of the dollar, which tends to move inversely in value with bullion. In recent activity, the dollar was slightly stronger. One dollar would buy 121.26 yen, up from 121.21 yen late Thursday. One euro would purchase $1.2965 virtually unchanged. If new data from Economic Cycle Research Institute is anything to go by, the advance for the greenback may continue. The Manhattan-based organization says its Weekly Leading Index grew 4.4% last week, up from a revised 4.1% for the prior period. That marked the 13th consecutive uptick in the indicator.
"It's bullish," says Anirvan Banerji, director of research at ECRI. "There's no question that there is no danger of a recession." However, he warns that it doesn't necessarily mean the Federal Reserve will need to hike interest rates to contain any burgeoning inflation. He notes that forward-looking price level indicators have trended lower since October 2005. Other things being equal, a high-growth, low-inflation economy would auger a strong dollar, and provide gold with a headwind. Turning to the gold patch, BMO Capital Markets initiated coverage of Northern Orion Resources ( NTO) with a market perform rating. The Philadelphia Gold and Silver Index was gaining 1.6% in recent activity, driven in part by gains from Freeport-McMoRan Copper & Gold ( FCX) and Goldcorp ( GG), up 3.5% and 2%, respectively. In base metals, copper was also rallying slightly, closing up 3 cents at $2.52 a pound on the Comex.