US gold futures ended higher on Thursday, taking direction from a jump in crude oil prices and helped by renewed physical buying, analysts said. "Largely it was higher oil prices, but US Treasuries came down a little bit, too. And I think the combination of the two helped," said James Steel, HSBC metals analyst.
Steel added that strong physical buying in the last several days also had begun to put a floor under the gold market. Most-active gold futures for August on the COMEX division of the New York Mercantile Exchange closed $3.20 higher at $655.90 an ounce, trading between $649.50 and $658.20.
Crude oil prices soared about 1.50 percent toward $71 a barrel on concerns over low fuel production from hobbling US oil refineries and a flare-up of Middle East violence. In addition, US Treasuries were hurt by the surge in US crude oil futures' move to a nine-month high, which added to lingering inflation worries.
US Treasury securities have been pressured by a combination of worries over tightening credit conditions globally and abandoned hopes for a Federal Reserve interest rate cut this year.
Gold becomes an attractive investment when inflation concerns heat up and as an alternative investment when stock and bond prices decline. As gold charts begin to show signs the metal's two-month sell-off may have found its bottom, physical buyers of the metal have begun to emerge, analysts said.
"Cash merchants, those that are going to use the metal physically, view the market as well priced at these levels," said HSBC's Steel, who noted physical buying has picked up.
Technical price charts have shown the $647 area on August gold futures has withstood several recent tests. Wednesday's low at $647 was last seen in mid-January. "There was a capitulation yesterday at the $647 low, the lowest it's been in awhile. It rallied a little bit, but not much, yesterday. Today it went up again," said Pioneer Futures Inc senior analyst Scott Meyers.
He added that August gold seemed to have found a floor. "It needs to take out $660 (an ounce) before it starts to get nice again in terms of the chart patterns. We're building a bottom and going to work higher. I think we can be back to $665 to $670 in a heartbeat. It's neutral, with a bias to the downside, but far from bearish," said Meyers.
Gold prices shrugged off the mixed signals in the May US producer price index, to focus on the rise in oil. Higher energy costs boosted producer prices 0.9 percent in May, but, excluding food and energy, prices paid at the factory level were up a more moderate and expected 0.2 percent.
COMEX estimated final volume at 64,292 lots, compared with turnover of 74,114 lots on Wednesday. The exchange set Thursday's options turnover at 2,293 lots. Spot gold increased to $651.20/2.70 an ounce in Thursday's after-hours trade, from $647.20/0.70 late Wednesday. London banks set the late gold fix at $653.25 an ounce. COMEX July silver added 10.50 cents to end at $13.1650 an ounce. The range spanned from $12.97 to $13.22.
Spot silver was quoted at $13.13/3.17 an ounce, up from $13.07/3.11 late Wednesday, after hitting a three-week low of $12.79. London silver was fixed at $13.04 an ounce. NYMEX July platinum rose $3.50 to $1,287.0 an ounce. Spot platinum was at $1,280/1,285 in late trade. September palladium finished up 85 cents at $371.50 an ounce. Spot palladium was quoted at $365.0/370.0.