US gold firm

US gold futures charged up to a strong close on Tuesday, nearly matching a 10-day high, as trade buyers found value at the lows and pulled technical buyers into the market to cover short positions in the price rally, traders said.
Gold buying was triggered when crude oil prices headed up toward the 10-month high posted on Monday and the dollar dropped against most major currencies, traders said. "Oil went up, the dollar fell, those were contributing factors. Also, we've been moving off the lows of last on Wednesday, and today, you had some good trade buying in there.
You also had some buy-stops get set off, so you had some technical aspects to it, as well," said one gold broker. Most-active gold futures for August on the Comex division of the New York Mercantile Exchange closed up $4.80 to $664.70 an ounce, and extended their rally up to a fresh 10-day high at $665.80, from a low at $657.30 an ounce.
"I think the market ran out of sellers and once we broke above $662.20 it seemed there were some buy-stops. Because of the momentum, you were also seeing some people hop on board once we broke above $660.50 to $661," one trader said.
Crude oil prices eased to levels below $72 a barrel on Tuesday, pulling back from a 10-month high on Monday. But losses were limited by a looming work strike in Nigeria that could cut output in the world's eighth-biggest oil exporter.
The falling dollar helped gold head higher, traders said. The dollar slipped against the major currencies on Tuesday as US bond yields continued to retreat from five-year highs hit last week, eroding their appeal to foreign investors.
Dollar weakness can help investment in dollar-denominated assets like gold in overseas markets. Traders also said gold prices have been tracking yields on the US Treasury's 10-year note.
"Some people fear that if interest rates go up, the stock market will go down, there will be a liquidity squeeze of some sort, and people will liquidate commodities," a trader said. On Tuesday, US government debt prices rose for a third straight day after May US housing starts showed their first drop since January and cemented the view that the housing sector would continue to drag on economic growth.
Benchmark bond yields, which move inversely to prices, slipped to their lowest levels in over a week. "What is helping the Treasury market is this idea that housing is remaining a very big risk to the economy.
The figures today, in many eyes reinforce that," said Tony Crescenzi, chief strategist with Miller, Tabai & Co New US home construction fell by 2.1 percent in May, a lower rate than economists' forecast. The weak data suggest the Federal Reserve would be less likely to raise interest rates. Comex estimated final gold volume at 63,743 lots, up from 42,017 lots on Monday.
Options volume was 7,859 on Tuesday. Spot gold jumped to $660.70/2.20 an ounce, up from $656.40/7.90 in late on Monday trade. London set the afternoon gold fix at $656.30 an ounce. Comex July silver cut losses to close up 9.0 cents at $13.3250 an ounce in a $13.1150 to $13.35 range.
Spot silver surged to $13.31/3.35 an ounce by late on Tuesday, up from $13.21/3.25 on Monday. London silver was fixed at $13.19 an ounce. Nymex July platinum slipped $1.0 to end at $1,298.50 an ounce. Spot platinum eased to $1,289/1,293. September palladium finished $1.50 higher at $376.50 an ounce. Spot palladium stood at $369.0/373.0.