US MIDDAY: gold rises

US gold futures climbed early on Friday, extending Thursday's gains, spurred by a weaker dollar and inflation worries on higher oil prices and a bullish report on agricultural commodities. Joseph Guzzardi at Sabin Commodities said from the COMEX floor that gold's rise was a knee-jerk type rally to a sell-out earlier this week, which he said was overdone.
At 10:31 am EDT (1431 GMT), most-active gold for August delivery on the COMEX division of the New York Mercantile Exchange was up $3.50 at $653.90 an ounce, dealing between $648.80 and $654.40.
Guzzardi cited a combination of bullish factors boosting gold, including higher energy prices and a weaker dollar. He added that gold should return to the $665 area in the near term. George Nickas at FC Stone in New York said that a bullish acreage report by the US Agriculture Department could extend support to metals prices.
"The acreage figures are calling for sharply higher grain prices, therefore, when the metal traders see the sharply higher prices as expected, they will start thinking once again of inflation fears," Nickas said.
Lured by high market prices, US farmers planted 92.9 million acres of corn this spring, the largest sowing in 63 years and up from the 90.5 million acres they had planned in March, the government said Friday. Nickas also said that the liquidation pressure from gold exchange-traded funds (ETF) earlier in the week had run its course.
"At $650, (gold) is a undervalued commodity," Nickas said. Earlier this week, worries about the credit markets prompted jittery investors to sell precious metals and liquidate holdings in bullion ETFs. Data showed that holdings in StreetTRACKS Gold Shares, the largest gold ETF, dropped just over 11 tonnes to 463 tonnes on Wednesday. It reported 464.37 tons of bullion holdings as of Friday.
On Thursday, the Federal Reserve in its post-policy-setting meeting statement dropped the word "elevated" from its description of core inflation. It also held the benchmark US interest rates steady at 5.25 percent.
James Steel, analyst at HSBC, said in a note to clients that the Fed statement reaffirmed inflationary concerns. He said that the Fed's tightening bias appeared to remain intact, and if it persisted, it would be at least moderately bearish for gold prices.
Spot gold rose to $651.00/$652.50 an ounce, compared with $647.90/$649.40 an ounce late Thursday. The London afternoon gold fix was set at $650.50. COMEX September silver was up 9.5 cents at $12.600 an ounce, dealing between $12.530 and $12.675. Spot silver was quoted at $12.49/12.53 an ounce, above the late Thursday quote of $12.41/12.46. London silver was fixed at $12.540 an ounce.
NYMEX October platinum eased $1 at $1,285.00 an ounce. Spot platinum traded at $1,270.50/1,275.50 an ounce. September palladium edged down 25 cents at $368.45 an ounce. Spot palladium fetched $364/368.