Updated from 2:10 p.m. EST

Gold spiked Tuesday after strong economic data out of France boosted the euro against the U.S. dollar.

Contracts for February delivery of bullion tacked on $11.80 to close at $645.90 an ounce on the Comex division of the New York Mercantile Exchange. The PowerShares DB Gold ( DGL) exchange-traded fund, which tracks futures prices, gained 1.7%.

The bullion ETFs, streetTracks Gold Shares ( GLD) and iShares Comex Gold Trust ( IAU), climbed 2.4% and 2.3%, respectively.

"The French consumer data was a little better than expected, and maybe points the way to a further European Central Bank rate hike," says Jason Schenker, an economist at Wachovia in Charlotte, N.C. Statistics showed spending on manufactured goods grew 1.3% in December when compared to November, Bloomberg reports.

In addition, traders seem to be anticipating some further strength out of the British economy, he says.

As a result, the greenback was losing against the major currencies. One dollar would recently buy 121.53 yen, down from 121.64 late Monday. One euro would buy $1.3024, vs. $1.2948 previously. The pound was buying $1.983, up marginally from $1.98 a day earlier. The price of gold tends to move inversely with the dollar.

Further adding to the allure of gold was news that the U.S. is sending a second aircraft carrier group to the Persian Gulf in an effort to dampen Iranian nuclear ambitions, the AP reports.

Some investors purchase gold as a safe haven investment during times of war or geopolitical uncertainty.

"We are not sure what will happen in Iran, and Tuesday evening the President is giving a speech which could be incisive or devisive or both," says Jeff Christian, managing director at New York-based consulting company CPM Group. Anticipation about the State of the Union address has some market participants on edge, he says.

Underlying trading in the gold market was the roll-forward of Comex futures positions from the soon-to-expire February contracts to longer-dated instruments. Open interest in the current month now stands at 12.4 million ounces, compared to 8.5 million ounces for April-dated futures.

Market watchers expect front-month interest to dwindle over the next few sessions.

In the official sector, the ECB says it sold 37 million euros of gold and receivables last week, or about 2.4 tons.

Turning to the precious metals patch, RBC Capital Markets pruned its stock price target on shares of Newmont Mining ( NEM) to $52 a share from $64. That news didn't hamper the stock, which was up 2.3% at $44.04.

Elsewhere, Barrick Gold ( ABX) was ahead by 3.5%.

Meanwhile, in base metals, copper contracts added 5 cents to close at $2.58 a pound on the Comex.

Diversified miner BHP ( BHP) moved higher by 3.3%.

Brazilian iron-ore producer Companhia Vale do Rio Doce ( RIO) surged 7.2% after the company said it would boost its dividend payout in 2007 to $1.65 billion, up 27% from $1.3 billion last year.

As for ferrous metals, Standard & Poor's sees a weaker steel market this year. Reduced consumption by automobile manufacturers and large consumer-held inventories will be critical factors for the industry, S&P says. Demand from nonresidential construction users should be a positive, the firm adds.

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