The gold price was heading for a close above $630/oz on Friday, the last trading day of calendar 2006.

The precious metal has been heading upwards since it bottomed at $611.30/oz eleven days ago, helped by recent tensions between Iran and the Western World and thin end of year markets.

"Having broken through key chart levels at $630, further gains could be in store for gold should it be able to hold above $630 and position for a break higher in the New Year," said a daily note from Standard Bank in London.

Overall, gold was relatively flat at $635.03/oz by 13:21 on Friday, ignoring a strong dollar that continues to remain under $1.32 against the euro, following the release of favourable US economic data on Thursday afternoon.

So far this December the gold price has retraced from $648.20/oz at the start of the month to as low as $611.30 by the middle of December and back up to its current price above $630/oz.

Standard Bank says there is potential for further upside in the price of the yellow metal. "Suspected funds re-positioning for the coming year after its recent corrective phase would also likely provide support in the interim. Resistance is now likely pegged around $640 with support at $624," said the bank.

The dollar was last at $1.3166 against the euro, compared to $1.3148 late on Thursday.

Platinum was up $7/oz at $1 117.50/oz, while palladium was quoted at $327.50/oz, up $6.50/oz from its previous close.

This 3 month chart of the gold ETF (GLD) shows the 50 day moving average recently crossing the 200 day moving average. This is often a very bullish signal and may indicate a rally in gold prices in the coming sessions.

Analyst John C Tumazos of Prudential Financial maintains his "overweight" rating on Freeport McMoRan Copper & Gold. The target price is set to $82.

In a research note published yesterday, the analyst mentions that despite the company’s $18 billion bank financing deal being valued at $2.00 per pound copper, the deal is likely to go through due to the financial community’s faith in the various Freeport-McMoRan companies as well as the reputation of the company’s CEO. The deal appears inevitable, given the expectation of the deal generating more than $2 billion in fees as well as the fact that the company accounted for more than half of all banking fees in the sector in the mid 1990's, the analyst adds.

In a move to attract small private investors, China on Monday lowered the trading threshold at the Shanghai Gold Exchange (SGE) from one kilogram to 100 grams.

SGE sources said 100-gram gold bars, which debuted on Monday at an initial price of 160 yuan (20.5 US dollars) per gram, started spot trading at an opening price of 157 yuan per gram and then remained flat for the entire trading session, closing at 157 yuan per gram, a drop of three yuan.

During Monday's trading, only 0.4 kg or four gold bars of this type changed hands, and transactions amounted to only 62,800 yuan.

However, business was brisk for other types of gold. 2,359 kg of two other conventional types of gold were traded and 1,506 kg of gold listed for trading delay.

An SGE spokesman blamed the poor market performance of the newly premiered 100-gram gold bars on a the Christmas holiday season.

Industry experts still believe China's latest move will help diversify gold investment channels in the country and standardize the market for gold transactions.

In July last year the SGE proposed spot trading of gold by private investors in cooperation with the Industrial and Commercial Bank of China (ICBC). However, the one-kg 160,000 yuan (20,000 US dollars) threshold turned off many private investors.

The volume of spot transactions by private investors in the first ten months accounted for just 0.57 per cent of total trading.

Gold held steady in thin trade on Friday, with many dealers already away for Christmas holidays, and the metal was likely to trade in a narrow range during the session ahead of a slew of US economic data.

Spot gold hit an intraday high of $619.40 an ounce and was at $618.70/619.70 by 04:03 GMT, steady near the $618.20/619.20 seen in late New York trade on Thursday.

Gold dropped more than $3 in the US market after falling crude oil prices triggered liquidation.

If the price stays around the current level, gold would end the year with a gain of around 20% but would still be some way off its peak in May of $730, its highest in 26 years.

"It's going to be a half-day in my office today. The trading range will be the same at $610 to $650 until the end of the year, although I also see a chance for gold to fall to $608 because of the thin trading," said a dealer in Singapore.

In Tokyo, benchmark gold futures on the Tokyo Commodity Exchange fell ¥11 per gram to ¥2 377, tracking declines in New York's Comex market.

Japanese retail invetors are cautious ahead of the Bank of Japan's policy meeting on interest rates in mid-January, while recent gains in Nikkei average have encouraged some investors to shift their money into the stock market, said dealers.

Puchases from Japanese investors helped gold reach multi-year highs this year.

"At this moment, people don't show any interest in commodities, not only in gold," said Yukuji Sonoda, a precious metals analyst at Daiichi Commodities in Tokyo, referring to a sell-off in base metals.

"Individual investors only show keen interest in the stock market," said Sonoda who expected gold to trade in a $620 to $625 range next week.

The dollar was little changed at ¥118.35 - off a six-week high of ¥118.53 hit on Thursday. The euro edged up to $1.3188 from around $1.3175.

Dealers are waiting for a fresh dose of US economic data on personal consumption, durable goods orders and consumer sentiment. The data may offer more clues on whether the Federal Reserve will start to trim interest rates next year.

Silver edged up to $12.41/12.48 an ounce from $12.35/12.42 an ounce in New York.

Platinum rose to $1 120/1 125 an ounce from $1 117/1 122. Dealers said the metal may trade in $1 120 to $1 130 an ounce range next week.

Palladium fell to $323/328 an ounce from $326/329 an ounce late in New York.

Gold trading was mixed on Thursday ahead of the release of key US data, which may offer clues as to whether the US Federal Reserve will cut interest rates next year and determine the metal's direction.

Trading was thin ahead of the year-end holidays, making gold prone to sharp fluctuations. Trading range was seen at $610 to $650 until the end of the year, according to some dealers.

"With fund managers looking to balance their accounts, do some window dressing before the end of the year, there is the potential for a few wobbles in things like the US dollar and the oil price," said a dealer in Sydney.

"That should be reflected in the gold price as well," he said.

Spot gold hit a bid high of $621.30 ounce, still down slightly from $621.70/623.20 an ounce late in New York on Wednesday. It had fallen to as low as $619.60 on Thursday.

"Many analysts expect gold to continue to remain within a narrow range going into year-end with market conditions remaining illiquid," said Investec Australia in a daily report.

"However, this should not be taken as a given, as relatively small volumes have the ability to move the market substantially during these illiquid periods," said Investec, which pegged support around $615 an ounce.

Benchmark gold futures on the Tokyo Commodity Exchange, currently December 2007, rose ¥2 per gram to ¥2 392.

The dollar held steady ahead of the release of the final reading of US third-quarter gross domestic product at 13:30 GMT and the Philadelphia Federal Reserve's manufacturing survey for December at 17:00 GMT.

The euro inched up to $1.3188. The dollar edged down to ¥118.35 but was within sight of a six-week high of ¥118.52 hit in the previous session.

Dealers said the data could help the market to better assess whether the Fed will cut rates in 2007. Lower US interest rates lessen the opportunity cost to investors of holding zero-yielding gold.

In other precious metals, silver edged down to $12.51/12.58 an ounce from $12.52/12.59 an ounce in New York.

Platinum rose to $1 121/1 126 an ounce from $1 118/1 126 an ounce and off Monday's low of $1 093 - the metal's lowest level since early November.

Chinese jewellery makers bought platinum at lower levels this week but retail investors, especially those in Japan, remained cautious after talk about the launch of an exchange-traded fund turned out to be unfounded.

"People are still afraid to buy platinum at this moment. But once the shock caused by the ETF talk is over, they will come back," said a dealer in Tokyo.

"I personally think we should rebound to $1,150 by the end of the year," said the dealer, referring to a level last seen in early December.

Rumours about the ETF launch propelled platinum to a record high of $1 395 an ounce in late November.

Palladium was barely changed at $323/328 an ounce.

Gold Fields, the world's fourth largest gold producer, has extended its offer to Western Areas shareholders by almost a month.

The new closing date of the all paper offer has been moved to lunchtime on Friday, 26 January next year from the previous closing data of 29 December.

Gold Fields said last week that it owned and had received acceptances representing 82 percent of Western Areas shares.

Gold Fields says it needs 94.1 percent of Western Areas to invoke Section 440k of the Companies Act, which allows it to "squeeze out" minority shareholders.

'Fund South Deep'

The company recently said shareholders must accept the offer or face the prospect of partially funding the South Deep mine's capital expenditure.

"Accordingly in the event that Gold Fields does not acquire 100 percent of Western Areas, the remaining shareholders of Western Areas would be asked to fund these cash requirements."

Harmony Gold and the Public Investment Corporation have already accepted the offer of 35 Gold Fields shares for every 100 Western Areas shares held.

Gold for immediate delivery rose as much as $1.13, or 0.2 percent, to $617.38 an ounce. It traded at $616.35 an ounce at 11:23 a.m. Mumbai time.

Bullion for February 2007 delivery rose $1.70, or 0.28 percent, to $619.60 an ounce on the Comex division of the New York Mercantile Exchange in after-hours electronic trading at 11:30 a.m. Mumbai time.

Gold for October 2007 delivery fell 6 yen, or 0.25 percent, to 2,361 yen a gram ($622 an ounce) on the Tokyo Commodity Exchange at 3:01 p.m. local time.

Gold in Asia rose for the second day as the U.S. dollar fell against the euro, spurring investors to buy the precious metal as an alternative investment.

The U.S. currency dropped from a three-week high yesterday after a report showed confidence among U.S. homebuilders deteriorated in December, leading traders to increase bets the Federal Reserve will cut interest rates next year. Gold generally moves in the opposite direction of the dollar.

``Gold is rising because of the weak dollar,'' said Kim Sung Gil, a trader at Woori Futures Co.'s overseas futures team in Seoul. ``It seems difficult for the Fed to raise interest rates as most of the economic indexes released in the U.S. have been negative.''

The National Association of Home Builders/Wells Fargo index of sentiment fell to 32 this month from 33 in November, the Washington-based association said. A reading below 50 means most respondents view conditions as poor.

The dollar will drop against the euro through the end of this month as a slump in housing will slow the U.S. economy, according to BNP Paribas SA. The central bank left its benchmark rate unchanged at 5.25 percent this month for the fourth straight meeting, after 17 increases starting in June 2004.

``It's a given that U.S. will lower interest rates next year and dollar will trade weak,'' Ramaswamy Iyer, chief executive officer at Mumbai-based Brics Commodities Pvt. said.

The dollar was at $1.3085 per euro at 11:24 a.m. Mumbai time after reaching $1.3053 yesterday, the strongest since Nov. 24. It reached a 20-month low of $1.3367 per euro on Dec. 4.

`Range-Bound'

Gold typically rises when the dollar falls, as investors try to hedge against erosion in the value of other assets denominated in the currency.

``Gold will largely remain range-bound ahead of the end of the year holidays'' Iyer said. He expects gold to trade between $610 and $620 this month.


In India the price of the metal for February delivery rose 26 rupees, or 0.3 percent, to 9,075 rupees per 10 grams, or 28,223 rupees per ounce, ($629 an ounce) at 11:33 a.m. Mumbai time on the Multi Commodity Exchange.

Gold held near its lowest level in four weeks today, losing some of its safe-haven appeal after the dollar shrugged off a tame US inflation reading and strengthened in New York.

Silver hovered not far from Friday’s three-week low, platinum dropped to its lowest level since November 2, while palladium fell to its lowest in nearly two weeks.

Spot gold hit a low of $614,90 an ounce, not far from Friday’s low of $614,20, before rebounding to $617,10/617,85 in early trade on the back of scattered buying from jewellery makers.

The metal was last quoted at $615,00/616,50 late in the US market on Friday, and off a 16-week high of $649,50 hit in early December.

Benchmark gold futures on the Tokyo Commodity Exchange fell 32 yen per gram to 2,367 yen after losses in New York’s Comex market, further dampening sentiment in the cash market.

"Private investors have lost the intention to buy more gold," said Yukuji Sonoda, precious metals analyst at Daiichi Commodities in Tokyo. He pegged key support around $610 an ounce - a level last seen in late November.

Dealers said gold’s lacklustre performance worried investors, especially those in Japan, where platinum buyers also sold back the metal. Platinum hit a low of $1,093 an ounce, its lowest in nearly seven weeks, down from $1,104/1,112 an ounce late in New York.

Rumours about the launch of an exchange-traded fund propelled platinum to a record high of $1,395 an ounce in late November. The ETF allows investors to trade the commodity on an exchange without buying futures.

Japanese investors and global investment funds have bought precious metals as an alternative to a fragile dollar. The dollar was little changed ahead of a Bank of Japan policy meeting and comments from BOJ governor Toshihiko Fukui to see whether he will signal a rate rise as soon as January.

The dollar traded at 118,05 yen, barely changed from 118,18 yen late on Friday.

The euro was at $1,3085 against the dollar, little changed from Friday when the US currency ignored a benign inflation report and rose as traders continued to take profits on the single currency’s recent rally.

Investors also await US current account data for the third quarter due in the afternoon, with dealers expecting the deficit to rise to $225,0bn from $218,4bn in the previous quarter. Silver edged up to $12,89/12,94 an ounce from $12,85/12,92 an ounce in New York on Friday, when it tumbled to its lowest since November 21 at $12,77.

"I think it’s hard for silver to regain $13 for the time being because the longs are still in the market. But I think this is only a correction. It’s not going to go down much lower," said a dealer in Hong Kong.

"Physical buyers will try to buy gold at the current level, but psychologically, they will also wait for more declines since gold has dropped dramatically last week," he said.

Palladium eased to $323/328 an ounce from $326/329. It had fallen to as low as $320 in early trade.

Gold bounced back and forth on Friday, reflecting a thin market ahead of the year-end, and a firm US dollar is likely to encourage more investors to unwind their positions.

Spot gold rose as high as $628.20 an ounce (oz), hit a low of $624.60 and was at $625.20/626.70/oz by 04:02 GMT, down slightly from $626.00/627.50 late in New York on Thursday.

Gold has fallen steadily since rallying to a 16-week high of $649.50 on December 1 as players locked in profits ahead of the Christmas and New Year holidays. The metal was trading well below the 26-year high of $730/oz hit in mid-May.

A dealer in Singapore said: "I think a lot of people are bit long, that's why gold doesn't move much even though oil is getting higher.

"But I guess everybody knows there's going to be year-end book squaring. They want to keep gold below $650 until the end of this year, and you may see some selling-off. For me, $610 will be a good support and I don't think gold will cross $650."

The euro hardly moved at $1.3145 while the dollar edged up to ¥117.95 from around ¥117.85 in New York after the Bank of Japan's tankan survey showed improved business sentiment but failed to alter expectations the BOJ will keep interest rates on hold next week.

The dollar had gained in the US market on Thursday after strong US jobless data strengthened the view the Federal Reserve may not have to cut interest rates just yet to stimulate the economy.

The US government said the number of people claiming initial unemployment benefits last week fell more sharply than economists had expected.

US crude oil futures extended gains to hover above $62 a barrel on Friday after rising more than $1 a day earlier on the back of an Opec decision to cut more production from February.

The physical sector saw light buying at lower levels in the past few days, which helped push up premiums for gold bars to 30USc/oz to the spot London price in Hong Kong from 10c last week.

"There's a little bit of buying," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong, adding that gold would be stuck between $620 and $635 until the Christmas holiday was over.

"There's position squaring ahead ... More players will leave the market," he said.


Platinum dropped to $1 104/1 109/oz from $1,108/1,118 late in New York.

Silver edged down to $13.75/13.80/oz from $13.76/13.83/oz in New York.

Palladium at $326/331/oz.

South Africa's Gold Fields Ltd, the world's fourth-largest gold producer, now owns 82 percent of Western Areas, it said on Thursday.

Gold Fields has offered 35 of its own shares for every 100 shares in Western Areas which owns half of South Deep, one of the world's deepest gold mines.

The offer is one part of three related deals worth $2.5 billion by Gold Fields to gain control of South Deep.

At the beginning of the month, the miner completed the purchase of Barrick Gold's 50 percent stake in South Deep and rival Harmony Gold said it would tender its 29.2 percent stake in Western Areas.

Buying the stake held by Canada's Barrick cost $1.52 billion, consisting of $1.2 billion in cash and 18.7 million of its own shares.

Last month, Gold Fields said it had concluded the first transaction, to buy a 34.7 percent stake in Western Areas owned by JCI Ltd.

Just because gold is down 14 percent from its high of $732 an ounce on May 12, doesn't mean the rally that began six years ago is coming to an end anytime soon.

The swooning U.S. dollar, which has become a proxy for the slowing American economy and the nation's humiliating lack of success arranging regime change in Iraq, banning weapons of mass destruction in North Korea and Iran and reducing its trade and budget deficits, is making gold Wall Street's darling again for 2007.

``Gold is the purest play against the dollar,'' said Louise Yamada, managing director of Yamada Technical Research Advisors LLC in New York, who sees gold surpassing $730 next year on its way to $3,000 within a decade. Yamada, the former head of technical research at Citigroup Inc., proclaimed gold cheap in 2001 when it fetched $279.

She now has lots of company among the world's biggest financial institutions. Deutsche Bank AG's chief metals economist, Peter Richardson, made gold his favorite pick for 2007. JPMorgan Chase & Co. analysts John Normand and Jon Bergtheil on Dec. 7 said only corn could rival gold as the best bet while Merrill Lynch & Co. analyst Michael Jalonen elevated gold's value through 2010.

``If you can only make one commodity investment,'' gold is the ``choice for 2007,'' said Richardson from his office in Melbourne.

That's partly because five of the past six bear markets for the dollar led to an increase in gold.

Dollar's Slide

The U.S. currency started gasping last February against the Euro and dropped 13.8 percent since then during what has been the worst American housing market in 15 years. On a trade- weighted basis, it has lost 6 percent of its value and is headed for its biggest annual drop since 2004.

Gold, up 22 percent in 2006, is poised for its sixth straight annual gain. The streak is unmatched since 1971 when gold was freed from its peg to the dollar after the U.S. government said it would no longer exchange its currency for the metal.

From the end of World War II, the dollar was fixed at $35 per ounce of gold. In 1934, gold rose to $35 per ounce from $20.67 after passage of the Gold Reserve Act in January that year.

Prices have jumped 131 percent since the end of 2000. The last such rally was in 1979, when gold advanced to $541 from $229 a year earlier and was headed to a record $850 in January 1980.

Breaking Gold Link

To be sure, there are enough skeptics to make the betting on gold controversial.

``It's rare that an asset outperforms others consistently year on year,'' said Andrew Kinsey at Johannesburg-based Craton Capital, whose $267 million precious-metals fund rose 51 percent this year. ``The dollar-gold relationship may break down next year. Geopolitical risks and energy prices could rise to the forefront and impact gold more than the value of the dollar.''

The U.S. dollar will rebound in 2007, said Joe Prendergast, global head of currency strategy at Credit Suisse in London, during a recent radio interview with ``Bloomberg on the Economy with Tom Keene.'' He predicts a 3 percent appreciation for the dollar by December 2007.

Some analysts say the current consensus that predicts no end to the dollar's weakness is wrong. ``The dollar is completely undervalued,'' said Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures Ltd. in Tokyo. ``Metal prices are hitting the tops. This month and next January, base and precious metals prices will go down.''

Gold Rallies

Investors who sell assets denominated in U.S. currency often buy gold. Declines of more than 20 percent for the dollar against six major currencies led to a gold rally of 22 percent from January 1971 to July 1973 and 95 percent from June 1976 to October 1978.

A tumbling dollar caused the metal to rise 40 percent from February 1985 to the end of 1987, 6 percent from June 1989 to September 1992 and 83 percent from July 2001 to December 2004.

Gold's $75 billion market, a fraction of the $2 trillion traded daily in foreign exchange, is getting a lift from widening budget and trade deficits that undermine the dollar. The International Monetary Fund estimates the U.S. current account deficit will expand 9.8 percent to $869.1 billion in 2006.

Tight Supply

``Gold is probably the most straightforward investment to go with in this environment because of its consistent inverse relationship to the dollar,'' said Yamada, voted Wall Street's best technical analyst from 2001 to 2004 in surveys by Institutional Investor magazine. ``Other countries are trying to diversify their dollar holdings. They're buying gold and anything they can to get out of the dollar.''

JPMorgan Chase's Normand and Bergtheil told clients that gold and corn will offer the best opportunities among commodity investments next year because of tight supply and a weakening dollar. The London-based analysts raised their estimate of average gold prices next year by 11 percent to $678 an ounce. Prices in 2008 will average $725 an ounce, they wrote.

``Gold is the only metal, base or precious, which will see no meaningful increase in mining supply next year,'' the analysts wrote, estimating that supply will grow by 1 percent.

Merrill's Jalonen raised his projections for gold in 2008 to $650 an ounce from $600, and 2009 was increased to $625 an ounce from $600. The Toronto-based analyst maintained his 2007 projection for a rally to an average of $675 an ounce ``due to a rebound in gold fabrication demand for bullion, lower central bank sales and continued growth in investment demand.''

The U.S. dollar was mixed Tuesday against other major currencies in European trading. Gold prices rose.

The euro traded at $1.3247, down from $1.3251 late Monday.

Other dollar rates compared with late rates Monday included: 116.86 Japanese yen, down from 116.88; 1.2022 Swiss francs, up from 1.2014, and 1.1517 Canadian dollars, up from 1.1481.

The British pound traded at $1.9619, up from $1.9587.

Gold rose to $629.50 per troy ounce in London, up from $629.30 late Monday. In Zurich, gold traded at $628.15, up from $627.93. Gold rose $2.15 to $629.55 in Hong Kong.

Silver opened in London at $13.83, up from $13.79.

Gold rose on Monday after hitting a three-week low, with bargain hunters and physical buyers supporting a market that remained vulnerable due to thin trading ahead of Christmas.

Platinum was also choppy, hovering near a five-week low of $1,094 an ounce hit on Thursday -- well below a record high of $1,395 reached on November 21.

"It appears that the market wants to see a weaker dollar and that's going to underpin the precious metals, especially gold and silver," Jeremy East, head of metals trading at Standard Chartered bank, said.

"We are coming into the year-end, coming into more illiquid markets. If we see the dollar start weakening, we can easily see gold back up to $650, $660 again," he said.

Gold touched a high of $628.20 and a low of $622.60 before settling at $626.10/627.60 an ounce by 1519 GMT, against $624.70/626.20 late in New York on Friday, when it fell $6.

The dollar steadied against other major currencies, giving back some of last week's gains made after solid U.S. jobs data helped to ease concerns that the Federal Reserve may need to cut interest rates early next year.

Dealers said the dollar would continue to give direction to the market in the near term. They awaited the Fed's last meeting of the year on Tuesday for hints as to the dollar's outlook.

Gold usually moves in the opposite direction to the dollar. A stronger greenback makes gold, which is denominated in dollars, more expensive for holders of other currencies.

Gold prices will top $1,000 an ounce in two to five years because of a currency crisis fueled by a continued devaluation of the dollar, a leading analyst and investor said.

Paul van Eeden of Toronto told Western mining interests that he does not expect gold prices to fall below $400 an ounce again.

"I say with a very high level of confidence that gold prices will go to $1,000 an ounce in the next two to five years," he said Thursday at the Northwest Mining Association's annual convention in Sparks.

Billed as the second largest annual mining convention in the U.S., the five-day gathering drew 1,800 people before it ended Friday.

Industry officials said van Eeden is among at least three dozen analysts who have predicted gold prices would surpass $1,000 an ounce over the next five years.

Gold prices have soared since hitting a 10-year low of $252.80 an ounce on July 20, 1999. They closed at $631 an ounce Friday on the New York Mercantile Exchange, down from a high of $725 an ounce on May 12.

Nevada is the world's third largest gold producer behind South Africa and Australia.

Laura Skaer, executive director of the mining association, said van Eeden's projection didn't surprise her as the industry is enjoying an unprecedented boom cycle.

"It makes sense economically given the political unrest around the world," she said. "Gold over the last 200 years has been the preferred currency. It's where people go in times of uncertainty."

But John Dobra, an economics professor at the University of Nevada, Reno, said he does not foresee enough devaluation in the dollar to push gold prices above $1,000 over the next five years.

"Anything is possible, but I think the dollar will probably not depreciate the 30 to 40 percent required to get us there," he said. "That big a change in that short period of time is not likely based on historical experience."

Russell Fields, president of the Nevada Mining Association, also was unsure whether gold prices would reach $1,000 an ounce by then.

"I've seen gold prices do different things other than what some of the best forecasters have predicted," he said.

Van Eeden said rising gold prices have been tied to the dollar's devaluation. The dollar has dropped an average of 10 percent this year compared with the pound, franc and euro.

Van Eeden said he expects America's increasing trade deficit to lead to an overall 35 percent drop in the value of the dollar against other currencies over the next two to five years.

"If that happens as I expect, gold prices will go over $1,000 an ounce," he said.

Van Eeden said he was fully invested in mining stocks from 1998 to May, when he sold half of the stocks.

"I thought gold prices were overextended. Always hedge your bets," he advised the audience.

The only factor that would cause gold prices to drop is if an over-valuation in the price of base metals forces a selloff of all metals, including gold, van Eeeden said.

"If not for that risk, I'd be 100 percent invested" in mining stocks, he said.

Jonathan Price, Nevada state geologist, said the industry is enjoying its greatest gold boom ever.

The 200 million ounces of gold produced mostly in Nevada since 1981 is more than the 29 million ounces produced during the California Gold Rush and the 95 million ounces produced in various areas of the U.S. from 1895 to 1920, Price said.

South Africa's Gold Fields Ltd will not raise its all-share offer for Western Areas, which will close on December 29, it said on Friday.

Gold Fields, the world's fourth biggest gold producer, said as of Thursday it had received acceptances for 66 percent of the shares under offer and, together with shares it already held, controlled 75.8 percent of the firm.

Gold Fields has offered 35 of its own shares for every 100 shares in Western Areas, which owns half of South Deep, one of the world's deepest gold mines.

The offer is one part of three related deals worth $2.5 billion by Gold Fields to gain control of South Deep, which has the world's biggest gold deposit.

Last week, Gold Fields completed the purchase of Barrick Gold's 50 percent stake in the mine and rival Harmony Gold said it would tender its 29.2 percent stake in Western Areas.

Buying the stake held by Canada's Barrick cost $1.52 billion, consisting of $1.2 billion in cash and 18.7 million of its own shares.

Gold Fields said last month it had concluded the first transaction, to buy a 34.7 percent stake in Western Areas owned by JCI Ltd.

Gold Fields' shares fell 1 percent to 127.50 rand by 1315 GMT while Western Areas' shares were unchanged at 44.50 rand, compared to a 0.33 percent rise in the gold mining index.

Barrick Gold Corp., the world's biggest gold producer, failed in a $1.71 billion hostile takeover bid for NovaGold Resources Inc.

Barrick said today in a statement it acquired 13.6 million shares at the close yesterday of its offer of $16 a share for Vancouver-based NovaGold, or 13 percent of the 106.7 million fully diluted shares outstanding.

``Barrick will continue its disciplined approach to acquisitions and other business opportunities,'' Chief Executive Officer Greg Wilkins said in the statement.

Barrick, based in Toronto, became the world's largest gold producer in March after completing the acquisition of Placer Dome. Inc.

Gold extended losses and hit its lowest level in two weeks on Thursday after the dollar strengthened on upbeat U.S. job growth data, raising fears of more sell-offs in coming days.

Other precious metals tracked gold. Platinum fell more than 2 percent and hit a five-week low with selling in Japanese futures further weighing on sentiment, while silver hovered below the six-month high of nearly $15 an ounce it reached this week.

Spot gold hit a low of $626.70 an ounce, its lowest since Nov. 22, down from $630.60/632.10 late in New York on Wednesday, when it had fallen nearly 2 percent.

"The thoughts were that we would be looking to test and break through $650 again and probably up towards $675. Given we're sort of below that, I would think investors might be a little bit more cautious," said Darren Heathcote of Investec Australia.

"I think we need to be a little bit more cautious now about where gold goes in the next few days. If it remains below $630s, I would think that we'll be targeting $620 again," said Heathcote, referring to a level last seen in mid-November.

Gold rallied to a 16-week high at $649.50 an ounce last Friday -- just below the stubborn $650 resistance level.

Benchmark gold futures on the Tokyo Commodity Exchange, currently October 2007, fell 35 yen per gram to 2,345 yen ($20.37), reflecting declines in New York's COMEX market.

Gold has gained on a weaker dollar before the U.S. currency changed course after surprisingly strong U.S. data on employment and service sector growth offset other figures showing manufacturing activity contracting.

A trail of weak economic data has investors bracing for the Federal Reserve to slash interest rates from the current 5.25 percent as many as three times next year -- even as Fed officials have indicated they remain worried about price pressures.

"A rise in the dollar and position unwinding ahead of the Christmas holiday season kept downward pressure on the precious metals market," said Hiroyuki Kikukawa, an associate director at Nihon Unicom Inc.

The European Central Bank's policy meeting later in the day could affect the currency market and precious metal prices, he said.

The dollar held gains scored in New York after a private-sector report showed solid U.S. job growth in November, boosting chances of a positive payrolls report later in the week.

The dollar was little changed at 115.10 yen , up from a four-month low of 114.43 yen hit on Tuesday. The euro was hardly changed at $1.3291 , hovering below a 20-month peak of $1.3370.

The physical sector slowed to a trickle, suggesting that jewellers and investors were waiting for more declines.

"I don't think people will buy at this level. We will probably see some interest at around $600," said a dealer in Hong Kong.

"Technically, the market has changed direction," said the dealer, adding that gold was now below the 14-day moving average around $635.

Barrick Gold Corp. has won approval for its Pascua Lama gold and silver project in South America, setting the stage for possible production by 2010.

After more than two years of reviews and several modifications, the Argentine province of San Juan approved Barrick's environmental impact assessment yesterday.

"This milestone decision is the result of a serious and thorough evaluation process on both sides of the border," Barrick's president and chief executive officer, Greg Wilkins, said yesterday in a written statement.

Pascua Lama straddles the border of Argentina and Chile more than 4,500 feet above sea level in the Andes mountains. It has been delayed several times by concerns about production costs and opposition from environmental groups.

In February, Chile gave the go-ahead to the $1.5-billion (U.S.) project, which may contain as much as much as 18.3 million ounces of gold and 650 million ounces of silver.

Out of Barrick's seven development projects, Pascua Lama is "next in line, so it is by default the most important one," said Victor Flores, an analyst with HSBC Securities.

Barrick said it must obtain several other permits before construction can begin.

Gold mining stocks headed south as prices for the metal cooled Tuesday, while copper miners followed the price of copper higher.

Barclays Capital analyst Kevin Norrish told clients in a report Tuesday that "some profit-taking has emerged overnight and early this morning" in the gold market, which has driven prices lower.

Gold for February delivery dipped $2.40 to $648.50 an ounce in midday trading on the New York Mercantile Exchange.

Shares of gold miner Barrick Gold Corp. fell 60 cents, or 2 percent, to $30.90 on the New York Stock Exchange. Newmont Mining Corp. shares edged 26 cents lower to $46.93, while Goldcorp Inc. shares shed 59 cents to $30.59.

March copper picked up 7 cents to $3.25 a pound.

Copper miners Phelps Dodge Corp. and Freeport McMoran Copper & Gold Inc. -- which have agreed to merge -- both saw their shares tick higher. Phelps Dodge gained 15 cents to $122.30 on the Big Board, while Freeport added 77 cents to $61.70. Peru's Southern Copper Corp. saw its shares lose 20 cents to $55.30.

Gold Opens Higher In Hong Kong

Gold opened at US$646.90 an ounce on Tuesday in Hong Kong, up US$6.24 an ounce from Monday's close of US$640.66.

February gold rose $2 to trade at $648.90 an ounce Monday morning.

"Dollar diversification will continue to be the main theme of the market with recent gains in ETF [exchanged-traded fund] holdings showing investors are keen to hold the yellow metal," said James Moore, an analyst at TheBullionDesk.com, in a note to clients. March silver was down 2 cents at $14.17 an ounce and March copper traded at $3.162 a pound, down 1 cent. Metals shares traded mainly higher, reflected by a 0.5% rise in the Amex Gold Bugs Index.

Gold Expected To Hit New Highs In 2007

Gold is expected to close the year on a stronger note and has potential to set new highs in 2007, but the market will continue to remain choppy in the near term, chartists said on Friday.

"I think we are going to go back initially to the $690-an-ounce area and at some stage to revisit that peak (set) in May this year," said independent metals analyst Cliff Green.

"There would still be plenty of short-term dips in this market," he said, but added that any near-term weakness should be aggressively bought.

Gold climbed to a 16-week high of $648.60 an ounce on Friday on a dollar weakness, but slipped to $644.50/645.25 by 1:30 p.m., down from $647.20/648.20 in New York late on Thursday.

Gold rallied to a 26-year high of $730 in mid-May as funds poured money into commodities amid worries about rising energy costs, tensions in the Middle East and uncertainties in the dollar's outlook.

It hit an all-time high of $850 an ounce in January 1980.

Robin Wilkin, technical analyst at J.P. Morgan, said gold's broad trading range of $550-$700 in 2006 was going to give way for a move towards the record high.

"(But) half of the problem is that a lot of gamma trading is going on. So every time it rallies, all the options guys are just selling loads and it's dampening the effect," he added.

Gamma trading refers to dealers covering their options exposure as a contract moves towards maturity.

Some chartists predicted that gold would trade in a range in the coming months before moving higher.

"You have got potentially further consolidation in the first quarter, but beyond that look for further upside," said MacNeil Curry, technical analyst at Barclays Capital.

Weekly chart pattern suggested that the choppy price range would give way to higher prices in the medium term, he added.

"Longer term, spot gold has resumed its long-term bull move," Karen Jones of Commerzbank wrote in a weekly report, adding that several technical patterns were supportive of the positive view towards the metal.

SILVER TO TRACK GOLD

Technical analysts, who predict future price movements based on past market performance, said silver was also showing similar technical patterns, and prices were expected to set new highs.

Spot silver jumped to a six-month high of $14.00 an ounce and was last quoted at $13.84/13.91. Prices surged to a 25-year high of $15.17 an ounce in May.

"All the precious metals would see new highs next year," said Roberts, adding silver would try to move towards $17-$18 in the long term.

Chartists said any drop in silver prices to around $12.50 an ounce on profit-taking would do some damage to the trend, but the metal was expected to resume its upward journey after a consolidation phase.

Gold futures rallied early Thursday as the dollar fell to a 14-year low against the British pound, while a bigger-than-expected rise in core inflation data burnished the metal's appeal as an inflation hedge.

Gold for December delivery was last up $8.50 at $644 an ounce. The benchmark contract closed lower Wednesday as traders weighed mixed economic data on the health of the U.S. economy and as the dollar won back some ground against the euro.

That trend reversed on Thursday with the dollar falling against all its major rivals, especially sterling, on continued concerns the U.S. economy will grow at a rate more slowly than other countries.

There was further support in data showing core inflation rose slightly faster than expected, at 0.2%, in October. This kept the year-over-year gain in the core personal consumption expenditure price index at 2.4%, well above the Federal Reserve's implied cap of 2%.

Economists had been expecting core prices to rise just 0.1%, according to a survey conducted by MarketWatch.

Meanwhile, oil prices extended their gains above $62 a barrel in a continued response to supply data that were viewed as bullish as well as to forecasts for cold weather across the U.S. in the coming days.

"The threat of oil-driven inflation and bearish sentiment toward the dollar will continue to draw investors towards gold and its unique properties as a store of value," said James Moore, analyst at TheBullionDesk in London. "While gold is meeting stiff resistance around $640, dips continue to find good support and given the movements in oil and the dollar, will eventually push gold on to $650," he said.

Other metals joined in gold's rally. Silver futures moved up 25.4 cents at $13.82 an ounce, platinum rose $24.10 an ounce and palladium added $3.70 to $326 an ounce. Copper rose 2.40 cents to $3,152 a pound.

The price of gold was down $3.81/oz by Wednesday afternoon as the dollar showed steady strength throughout trade on Wednesday.

At 3.30pm US GDP figures were released showing that the economy had grown by a revised 2.2 percent in the third quarter, compared to the 1.6 percent figure released previously. The market had expected growth of about 1.8 percent.

By 4.02pm, spot gold was quoted at $635.89 a troy ounce from an overnight close of $639.70/oz.

The euro was bid at $1.3151 from $1.3193 late on Tuesday.

Matthew Turner, analyst at Virtual Metals in London, says that gold will continue to track the dollar in the short-term and points out that some market watchers say this correlation will continue for the next year.

New home sales data out of the US was still expected at 5pm SA time.

In a report by National Australia Bank economist, Gerard Burg, on Wednesday, which forecast an average gold price of $675/oz in 2007, up from his 2006 forecast of $606/oz.

The reasons behind the bullish forecast included US interest rate cuts and increasing jewellery demand for the yellow metal.

Turner says Virtual Metals is seeing signs of a platinum market in balance after years of deficit. The price has come down dramatically after last weeks’ dramatic rise to record highs of $1400/oz.

Platinum was flat at $1155/oz, while palladium was quoted at $319.50/oz, down $2.50 from its overnight close.

Gold prices are likely to head higher in 2007, benefiting from US interest rate cuts and increased demand for the metal from jewellers, National Australia Bank minerals and energy economist Gerard Burg said in a report.

The report forecasts gold to average 675 usd an ounce next year, up 11 pct over the expected average price of 606 usd for 2006.

'In 2007, gold prices are expected to rise further, particularly as the US Federal Reserve begins to cut interest rates in the second half of the year,' Burg said.

He said such cuts should provide increased incentives for gold investment, as gold's relative return improves in comparison with fixed interest assets, such as bonds.

But, Burg said, the path of prices over 2007 may be dependent on consumer demand, noting that the high volatility in gold prices in 2006 deterred jewellery consumers, particularly in price sensitive regions such as India and the Middle East.

Burg said perceptions about global political stability, particularly in the Middle East, inflation and economic growth prospects will also have an influence on gold markets, adding some uncertainty, but also potentially boosting investment demand.

NAB contends that an upward trend in gold prices will return following the weaker-than-expected performance of the metal over the past four months.

Burge noted the volume of speculative interest in gold markets, as represented by non-commercial positions on the COMEX, has fallen in recent months, in line with weaker price movements.

But, he said, speculative positions have resumed an upward trend since the start of November, supporting a price recovery.

As well, further price support should come from producers cutting forward sales by 357 tons in the first three quarters of 2006 with more to come, he said.

For the first 10 months of 2006, gold prices averaged 600 usd an ounce, a year-on- year increase of 38 pct. Since peaking in May, at over 720 usd an ounce, the metal fell back to 563 usd in early October before recovering to trade around 637 usd

For the first three quarters of 2006, end-user gold consumption decreased by around 13 pct to total 2455 metric tons.

Burg said the fall reflected a sharp decrease in jewellery consumption, which fell by 18 pct over the period.

Jewellery is the largest end-use sector for gold, accounting for over two-thirds of total consumption in the first three quarters of 2006.

Burg said despite strong gold prices, output has been slow to increase

'Under investment in exploration and development in the late 1990s, combined with rising costs for producers, has delayed new projects,' he said.

For the first three quarters of 2006, global gold output slipped by 2.1 pct to 1,804 metric tons.

Burg said gold production is forecast to increase modestly in 2007, with increased output in Australia and North and South America, more than offsetting declines elsewhere.

NAB is forecasting global output to rise 3.3 pct to 2,575 tons in calendar 2007 from 2006.

Gold fell more than one percent on Tuesday from 15-week highs scored the previous day as investors took profits ahead of the release of key U.S. data, dealers said.

Platinum slipped to a three-week low before rebounding, while silver and palladium were little changed.

"Unless the dollar starts to weaken significantly again, the market does seem to have done enough for the time being," said Simon Weeks, director of precious metals at ScotiaMocatta.

If gold failed to get back above $640-$642, prices might drop to around $630 -- the level in the middle of last week when U.S. traders left the market ahead of the Thanksgiving holiday, he said.

Investors awaited comments from Federal Reserve Chairman Ben Bernanke on the economic outlook due at 1730 GMT and U.S. third-quarter gross domestic product data due on Wednesday.

Spot gold hit a high of $641.70 an ounce before falling to $632.80/633.45 by 1528 GMT, against $640.60/641.60 in New York late on Monday, when prices rose to their highest since mid-August.

Profit-taking might persist, but prices were unlikely to drop sharply in the coming days, dealers said.

"Overall, the broad macroeconomic context looks positive for gold at present, but further gains from here will continue to be highly reliant on the future path of the dollar," Barclays Capital said in a daily report.

Gold moved lower despite weakness in the dollar, which fell to a fresh 20-month low against the euro before paring losses.

Gold often moves in the opposite direction to the dollar.

Despite selling by gold investors on Tuesday, UBS Investment Bank forecast the price at $660 in a month and at $690 three months from now.

TheBullionDesk.com said in a note that chart resistance around $640-$642 and caution ahead of Bernanke's address was curbing gold's bullish sentiment.

"However, the metal's increasing correlation with the euro and return of investor money, as players begin to diversify away from the greenback, should see gold challenge $650 and eventually $685 before year-end," it said.

In other metals, platinum dropped as low as $1,130 an ounce before rising to $1,155/1,165, compared with $1,140/1,150 in the U.S. market. Prices have fallen 19 percent since touching a record high of $1,395 last week.

Silver edged down to $13.42/13.49 an ounce from $13.46/13.53, while palladium was down $1 at $322/327.

Gold hovered near its highest
level in more than three months on Tuesday, but investors may
hold off chasing the metal too strongly ahead of the release of
key U.S. data.
Spot gold hit a high of $641.70 an ounce before
slipping to $639.20/640.20 an ounce by 0350 GMT, down from
$640.60/641.60 late in New York.
 The metal had rallied to its highest since August 11 at
$641.75 an ounce on Monday on a weaker dollar, firm crude oil
prices as well as purchases after the U.S. Thanksgiving
Day holiday.
 Profit taking may persist, but dealers said gold would find
support around $635. Investors await comments from Federal
Reserve Chairman Ben Bernanke on the economic outlook due at
1730 GMT and U.S. third-quarter gross domestic product data due
on Wednesday.
 "If you've made some money at this stage, I guess you would
want to take some profit. I think it's going to be a tight
range and gold is pretty well tied to the U.S. dollar," said a
dealer in Sydney.
 "But the technical picture looks better," he said.
 The euro inched up to $1.3145, closing in on a
20-month high of $1.3180 hit on electronic trading platform EBS
on Monday. The dollar dipped to 115.95 yen from around
116.10 yen in late U.S. trade.
 "There was no fresh buying at around $642. People are still
talking about buying at lower levels," said Ronald Leung,
director of Lee Cheong Gold Dealers in Hong Kong.
 "There will be another range trade of $630 to $650," he
said.
 Benchmark gold futures on the Tokyo Commodity
Exchange, currently October 2007, fell 9 yen per gram to 2,411
yen, having risen to a 2-week high the previous day on
fund buying.
Platinum dropped to its lowest level in more than
three weeks at $1,130 an ounce as fund selling continued after
talk of an exchange-traded platinum fund subsided.It has lost around nearly 19 percent in value sincetouching a record high of $1,395
last week. The metal was last quoted at $1,140/1,150 late in New York.

Silver edged up to $13.47/13.54 an ounce from
$13.46/13.53 late in New York.Palladium rose to $324/329 an ounce from $323/328.

Spot gold traded as high as $641.90/oz on Monday and could head towards the $700/oz level again if the dollar continues to weaken against the euro.

This is according to Gregor Krall, technical analyst from BOE Private Clients, who says the euro has broken its seven-month range and is now targeting a level of $1.36.

This is favourable for gold both as an alternative investment and because it becomes cheaper in other currencies.

"The most recent move above $636.50 validates a reverse head and shoulder formation with an upside target just above $700," Krall told I-Net Bridge, "with an initial target at $660/oz."

The euro and the pound surged against the dollar recently after comments by the deputy governor of the People's Bank of China coupled with concerns about the US economy caused selling in the US currency.

US holidays have induced thin liquidity in the market, which has contributed to the sharp gains.

By 1.49pm on Monday, the price of gold was up $1.10/oz at $639.10/oz. The yellow metal is up over $80/oz or 14 percent since it hit a more than three month low of $558.10/oz on 4 October.

The euro was bid at $1.3118 from $1.3156 late on Friday, while the near-dated Brent crude contract was quoted at $59.85 a barrel from Friday's $60.03.

Platinum was quoted at $1185/oz from Friday's close of $1187.50/oz. Palladium was quoted at $328.50/oz, up $3.50 from its overnight close.

Gold climbed to its highest level in more than three months on Monday as a weaker dollar and firm oil prices prompted investors to buy the metal.

Silver touched a six-month high, but platinum fell $5 an ounce to trade way below last week's record high levels.

Spot gold was quoted at $639.10/640.10 an ounce by 1113 GMT, against $638.10/639.10 in Europe late on Friday. The metal rose as high as $641.75 an ounce in Asia.

"At $640, people sold and locked in some of the profit, but overall gold looks very strong. There is more upside (potential) at the moment than downside," said Michael Widmer, metals analyst at Calyon Corporate and Investment Bank.

"People have become more confident towards gold and less confident towards the dollar. There is enough evidence for the dollar to stay weak in the next few months."

The dollar backed away from a 20-month low hit earlier against the euro and a three-month trough versus the yen, as comments from France's finance minister cooled last week's euro rally.

A weaker dollar makes gold cheaper for holders of other currencies. The metal is also generally seen as a hedge against inflation.

Oil rose one percent towards $60 a barrel after Saudi Arabia's oil minister said OPEC may cut output further when it meets on December 14.

The gold market was likely to remain choppy on Monday as U.S. investors would return to the market after holidays.

"U.S. traders returning after their long Thanksgiving holiday may look to unwind some weekend longs, taking advantage of the market over $10 higher than Wednesday's close," said James Moore, precious metals analyst at TheBullionDesk.com.

"But the combination of strong technical outlook, weak dollar/firm oil should see gold target $650 in the coming sessions," he wrote in a daily market report.

Dealers said firm gold prices were expected to hit physical demand in key consuming nations.

The World Gold Council said Saudi Arabia's third-quarter gold demand fell 9 percent to 33.9 tonnes compared with the same period in 2005 as high prices and a downturn in the local bourse dampened sales.

"The market is in a nice upward trend after breaking through a key level today based on the dollar's weakness," said Shuji Sugata, assistant manager at Mitsubishi Corp. Futures and Securities Ltd.

"We are more convinced that the outlook for gold will stay strong in the longer term," Sugata said.

Silver rose as high as $13.54 an ounce before dropping to $13.46/13.53, against $13.39/13.46 on Friday.

Platinum was quoted at $1,180/1,190 an ounce, down from $1,185/1,200 on Friday. The metal had surged to a record high of $1,395 last Tuesday. Palladium was at $326/331 an ounce, up $1 from its precious close.

The price of gold rallied on Friday due to a dramatic drop in the US Dollar. This one year comparative chart shows the price fluctuations between the US Dollar and the StreetTracks Gold ETF (GLD). In May there was a dramatic drop in the US Dollar and Gold rallied to the $700 level. This current weakness in the USD may the catalyst that Gold needs to re-test the highs set in May.

Gold prices climbed 1.4 percent on Friday on a weaker dollar, with the absence of U.S. players making the market choppy, dealers said.

Platinum also gained, but traded well below this week's record high of $1,395 an ounce on talk of an exchange traded fund (ETF). Other precious metals followed gold's upward move.

"The market is trying to get up to $640 an ounce at some point, but there are some sell orders around there," said a precious metals trader in London.

"The dollar is weak at the moment. The market is fairly thin so it didn't take a huge amount to move it up," he added.

Spot gold was quoted at $639.30/640.30 an ounce by 1453 GMT, up from $630.30/631.30 late in London on Thursday.

Gold was helped by the euro, which shot above $1.31 for the first time since April 2005, extending sharp gains made this week as a combination of euro-positive factors finally triggered a break-out of long-established ranges.

Gold often moves in the opposite direction to the dollar and is generally seen as a hedge against inflation."This move in the dollar, if sustained, will see precious metals prices gain further ground," said a market report from UBS Investment Bank, which saw gold prices at $640 in one month and $670 in three months from now.

Dealers said prices were vulnerable to wider fluctuations due to the lower numbers of players in the market. New York commodities and energy markets will remain closed on Friday for the Thanksgiving holiday, re-opening on Monday.

"Gold is gaining and $650 an ounce must be the target. But it wouldn't go there today because no one will dare to do that if there is no U.S. trading. It's too risky," said Matthew Turner, precious metals analyst at Virtual Metals in London.

In other precious metals, spot platinum rose to $1,185/1,200 an ounce from $1,163/1,178 in London, where it gained 1.8 percent, capping a volatile week in which it hit a new record peak.

Dealers said the metal had potential to gain on positive fundamentals. The market is expected to remain in deficit in 2006 for the eight year in a row.

Talk of an ETF could resurface again, prompting speculators to build fresh positions, dealers added.

Silver was at $13.43/13.53 an ounce, up from $13.09/13.16, while palladium rose to $325/330 an ounce from $322/32.

Gold ticked up on Friday as a weaker dollar and thin liquidity due to holidays lifted prices, while platinum steadied after a volatile week that saw it touch a new record peak on speculative buying.

Spot gold had risen to $632,30/633,30 an ounce in early trade, up from $630,20/631,20 late in London.

"It’s very thin as the Japanese have just come back from a holiday and the Americans are still not in today," said Ellison Chu, senior manager at Standard Bank London in Hong Kong.

Japanese markets reopened for trade on Friday following a national vacation on Thursday, although New York commodities and energy markets will remain closed on Friday for the Thanksgiving holiday.

"The US dollar and oil price lead gold higher, and we may see $635 again."

The dollar held near a five-and-a-half month low against the euro on a strong German business sentiment survey that strengthened expectations that euro zone interest rates will keep rising into next year.

In early trade, the dollar stood at about $1,2954 against the euro, putting it well in range of $1,2979, above which would be its lowest point since May last year.

Against the yen, the dollar was at 116,36, just off a nadir of 116,14 hit the previous day.

Oil prices steadied after crude stocks increased in top consumer the US, weighing on already well-supplied markets, with US crude rising 4 cents a barrel to $59,28.

Benchmark gold futures on the Tokyo Commodity Exchange dipped ¥3 per gram to 2,396 yen per gram.

Spot platinum was at $1,165 an ounce, roughly steady with $1,163 in London, where it had gained as much as 1,8%, capping a volatile week in which it hit a new record peak of $1,395. The metal had spiked amid talk of the launch of an exchange traded fund only to tumble 18% the next day.

"Platinum spiked up on panic short-covering, I don’t think it was investors, but that desperation has calmed down now and the macro forces are resuming again," said a Singapore-based trader. Silver was at $13,12/13,17 an ounce from $13,10/13,17 late in London. Palladium was at $324,00/329,00 an ounce, against $322/327.

Gold steadied in quiet trade on Thursday and looked at the dollar and oil for direction, but platinum gained after tumbling this week from record highs.

Spot gold hovered in a tight $3-an-ounce range and was quoted at $630.20/631.20 an ounce by 1530 GMT, little changed from $629.90/630.90 in New York late on Wednesday.

"Gold has been in a pretty narrow range and has been consolidating. I don't expect any dramatic moves in the last weeks of the year," Jeremy East, head of metals trading at Standard Chartered Bank in London, said.

"People may be taking some risk off the table and it looks like the long-term investors are staying with the market."

Dealers said the market was likely to remain quiet, with the United States shut for Thanksgiving. There were no U.S. data or policymaker speeches later in the day.

Investors would focus on external factors for market direction, they added.

"Gold is still struggling to overcome the $628-$630 chart area at the moment but given the dollar's recent movements, I would expect gold to continue higher once the market returns to full operations next week," said James Moore, precious metals analyst at TheBullionDesk.com.

The euro hit a 5-1/2-month high against the dollar, while oil eased after crude stocks piled up in top consumer the United States and weighed heavy on amply-supplied markets.

Gold often moves in the opposite direction of the dollar and is generally seen as a hedge against inflation.

"Gold has moved back up above $630 but light volumes due to the Thanksgiving holiday in the U.S. are likely to keep trading quiet through the rest of the week," Barclays Capital said.

"Should dollar weakness persist, we see some upside potential for gold as trade returns in full swing next week."

PLATINUM GAINS

In other precious metals, platinum gained as much as 1.8 percent before easing to $1,163/1,178, against $1,145/1,165 an ounce in the U.S. market.

The metal has been volatile this week, hitting a record high of $1,395 on Tuesday on talks of the launch of an exchange traded fund and tumbling 18 percent the next day.

The Shanghai Gold Exchange widened the maximum daily trading range for gold and platinum to 30 percent from 10 percent, which would allow prices to track more closely swings in international prices.

"Now those short positions have been covered and we are almost back to normality now. Medium term, I am quite friendly to the platinum market," East said.

"The outlook is good and supply is relatively inelastic. We know that demand is going to be increasing over the next few years," he added.

Silver was at $13.10/13.17 an ounce, higher from $13.04/13.11 in New York, while palladium was unchanged at $322/327 an ounce.

Gold closed higher in Hong Kong Wednesday at US$628.20 an ounce, up US$3.00 an ounce from Tuesday's close of US$625.20.

Platinum jumped more than 11 percent to hit a record high in volatile trade on Tuesday as funds poured money into the metal, driven by talk about the launch of an exchange traded fund (ETF).

But the metal retreated about five percent from its peak on profit-taking. Spot platinum surged as high as $1,395 an ounce before falling to $1,320/1,340 by 1251 GMT, still well above $1,251/1,256 late in New York on Monday.

"It's being driven entirely by speculation that there is going to be the launch of an ETF," said Stephen Briggs, economist at SG Corporate and Investment Banking.

The platinum market was very small compared to gold and silver and had limited above-ground stocks, he said, adding an ETF would have a significant impact on the availability of the metal for genuine consumers.

"That's why the reaction is so dramatic."

ETFs, often backed by a physical commodity, enable investors to trade securities on an exchange and give investors a return based on commodities prices, without the need to trade futures or take physical delivery.

The metal, mainly used in jewellery and to clean car exhaust emissions, has jumped more than 30 percent in a month on the ETF talk, but there has been no confirmation so far.

A spokeswoman at U.S.-based Barclays Global Investors, which has launched gold and silver ETFs, told Reuters late on Monday the company had not filed any regulatory documents relating to a platinum trust and did not have any immediate plan to do so.

"A platinum ETF could be difficult to establish due to the lack of liquidity and likely resistance from producers and auto manufacturers," Numis Securities said in a market report.

PHYSICAL DEMAND MAY SLIP

Johnson Matthey, the world's top platinum distributor, said last week that supply and demand for the metal were likely to reach record levels in 2006, leaving the global market in deficit for the eighth consecutive year.

"Indeed we believe the longer term prospects for platinum demand have been damaged by this move," said John Reade, analyst at UBS Investment Bank.

"It will accelerate substitution efforts from industrial users of the metal and with Chinese jewelers unable or unwilling to buy platinum ahead of Chinese New Year, it will prompt a switch to other precious metals."

Shares in Lonmin, the world's third-biggest platinum miner, rose about four percent mainly on high metal prices.

"Platinum is back in uncharted territory and the combination of extreme illiquidity and aggressive speculation could push prices even further," said James Moore, precious metals analyst at TheBullionDesk.com.

Other precious metals drifted higher tracking platinum. Gold hit a high of $626 and was last at $624.90/625.90 an ounce, against $622.20/623.20 late in New York.

Silver increased to $12.88/12.95 from $12.74/12.81 an ounce, while palladium rose to $325/330 from $319/323.

The U.S. dollar was lower against most other key currencies in European trading Monday morning. Gold rose.


Gold traded in London at $624.00 bid per troy ounce, up from $617.75 late Friday.

In Zurich the bid price was $622.45, up from $618.03.

Gold rose $5.90 in Hong Kong to close at $624.10.

Silver opened in London at $12.68 bid per troy ounce, unchanged.

This one year chart of the StreetTracks Gold Index (GLD) shows the current price hitting technical resistance at $62. If the Index can break through this level it is poised to go much higher and possibly test the levels hit in May and June of 2006.

Gold rebounded Friday after dropping earlier in the day, following movements in the energy and currency markets.

December gold settled up 80 cents to $622.50 a troy ounce, after initially trading as low as $614.50.

Gold initially sold off as energy prices weakened and the dollar climbed. But then as the dollar pulled back and oil prices pulled up, gold recovered.

"I think there is still a general inclination to buy the market on the dips," said Stephen Platt, analyst with Archer Financial Services, also noting there's a general sentiment that December gold's support area is $615-$618.

"There is some feeling we could maybe work higher into the end of the year," he added.

December crude fell as low as $54.86 Friday, but rebounded to well above $55 in later trading. Meanwhile, the dollar rose early in the day against the euro, but then ended lower. The euro bought $1.2816 in late New York trading, after a U.S. government report said housing construction starts fell to a more than six-year low.

Gold is viewed as a hedge against a weakening dollar.

Meanwhile, January platinum settled up $2.80 at $1,192.10 an ounce, after trading as low as $1,135.

December silver settled down 14.5 cents to $12.80, after trading as low as $12.60.

December palladium settled down $4.30 to $317.95 an ounce.

Most-active December copper settled up 1.65 cents at $3.0575 per pound. Earlier in the day session the contract dipped to a fresh 4-1/2 month low of $2.98 but rebounded on a softening dollar and rally in crude oil.

Gold bounced around on Friday as the U.S. dollar extended gains, while platinum dropped more than 2 percent on persistent selling in Japan following this week's report from top distributor Johnson Matthey.

Spot gold fell to an intraday low of $616.10 an ounce, hit a high of $618.90 and was at $618.00/619.00 by 0723 GMT.

Gold was last quoted at $618.00/619.00 in New York on Thursday, when the dollar gained after the U.S. government said consumer prices fell by a greater-than-expected 0.5 percent in October.

"I reckon we may hit $610 and trade below that. Resistance is going to be around $630, and I think oil can become more of an issue again should it break $60," said a dealer in Sydney.

Gold fell nearly $6 in the U.S. market as the dollar firmed after the CPI data reinforced views the Federal Reserve will keep interest rates steady. The metal has lost around 3 percent in value since rallying to a two-month high of $636.50 last week.

A rising U.S. currency makes dollar-denominated gold more expensive for holders of other currencies.

Spot gold was up over $3/oz by early afternoon trade today but remained at the upper end of a range ahead of US consumer price data and continued speculation that the Chinese Central Bank may buy gold to diversify its reserves.

Modest two-way interest has been seen this morning but for the moment gold should continue its theme of consolidation around $613/oz $628/oz with a bias to the upside amidst growing speculation of CB (central bank) diversification away from the dollar," said the TheBullionDesk.com’s James Moore in a note.

Recent producer inflation levels in the US, that were lower than the market expected, hinted at a potential halt to rate hikes in future, however Federal Bank meeting minutes do indicate a more hawkish position, according to Nedbank Treasury.

"Gold prices came under pressure yesterday as the minutes of the last FOMC meeting suggested a much more hawkish Fed than had been anticipated," said the bank.

The price of oil, which has an effect on the gold price because of its global inflation influence, was also up slightly yesterday as inventory levels were shown to be down.

In afternoon trade, gold was trading at $625,80/oz, up $3,10 on yesterday’s close of $622,70/oz.

The dollar was trading at $1,2804 against the euro, from a previous close of $1,2827.

This 6 month chart of December 2006 Gold shows price resistance at $625. If it is able to break through in the coming sessions there may be a rally back to the $660 range.

The head of the world's second-biggest gold producer, Newmont Mining Corp., said on Tuesday gold prices could go even higher due to concerns about the U.S. economy and pressure on the dollar.

"Gold has a lot of headroom to grow, and we have a way to go in the current gold cycle," Newmont Chairman and Chief Executive Officer Wayne Murdy told reporters in Johannesburg.

Murdy said he would not estimate the gold price towards December and next year but that it would hover around current levels or better. Gold traded at $636 an ounce on Tuesday.

"When we look at the gold price, the factors driving the price have not changed much, the supply side has not improved and we see a flat to declining supply in the future," he said.

"There is strong physical demand from jewellers when the price goes below $600 per ounce," he added.

Murdy, who heads the Denver-based mining company, said the performance of the U.S. economy contributed to his expectations of a stronger gold price.

"Since gold is priced on an inverse relation to the dollar, we see continued weakening of the dollar versus Asian currencies mainly due to the huge trade imbalance with China, and we don't see that changing drastically," Murdy said.

He said the United States was spending some $60 billion more per month on imports than exports and that this had worsened its balance of payments, favouring a weaker dollar.

"The development of China, India and Brazil economies has also boosted demand for gold, making this a decade of commodities as opposed to the dot.com era of the 1990s," he said on the sidelines of a mining safety and health conference.

WEST AFRICA

Murdy said Newmont was positive about its exploration in West Africa and that the company had in Ghana alone a reserve of 18 million ounces by 2005, which it hoped would increase.

"We are doing exploration in West Africa and have been fortunate in Ghana. We continue to explore, and we feel we will be very successful in growing our reserve base," Murdy said.

Ghana is Africa's second-biggest producer of gold after South Africa, producing some 6.5 million ounces last year.

Newmont's potential production from Ghana is 950,000 ounces a year from two mines -- Ahafo, which is expected to produce between 225,000 and 250,000 ounces of gold this year, and a $525 million, 450,000-ounce-a-year site at Akyem.

Akyem has been hit by a delayed clearance on its environmental impact assessment approval by authorities, while projected start-up costs have been rising, Murdy said.

A merger in January between North American-based Barrick Gold and Placer Dome created the world's top gold producer and pushed Newmont to the number two slot.

Spot gold fell below $630/oz in early afternoon trade on Monday as it again failed to hold above this key level. The dollar and oil, both recent drivers of the yellow metal, were slightly stronger and weaker respectively.

Temporary highs

On Friday gold hit a more than two-month high of $636.50/oz following comments from China pointing at a diversification of its reserves away from the 70 percent exposure to dollar instruments.

In a note to clients on Friday, Numis Securities in London said that gold makes up one percent of the Chinese Central Banks $1 trillion of foreign exchange reserves.

"If assuming China's economy were to remain flat and the $1 trillion of reserves were to include five percent gold, then this would require gold reserves worth $50-billon," said the note.

The price has since cooled to its latest price of $624.10/oz at 1.55pm, down $4.35/oz from its closing price of $628.45/oz. It earlier traded as high as $632.65/oz.

US currency the key driver

In the November edition of the newsletter, Fortis Metals Monthly, released by Virtual Metals in London, investors are pointed out as the main drivers of gold at the moment.

"While there is always the chance that gold might recover ground lost in recent months and revisit the highs of 2006 before the end of the year, the chances of this are in the hands of investors, watching the performance of the US currency," said the newsletter.

Since 13 October, when the dollar was trading at its strongest against the euro in three months, it has weakened from $1.2480 to a low of $1.29 on Friday. Gold has followed this move and increased by $60/oz since then, from $576.50/oz to its two-month high reached on Friday.

By 2pm the dollar was slightly stronger against the euro at $1.2834, compared to $1.2851 late Friday.

The Fortis newsletter also discussed platinum saying that despite net longs on Nymex having decreased by 67 percent since the start of September, environmental legislation on toxic emissions from vehicles around the world would continue to provide a solid base for demand in the longer-term.

Platinum was quoted at $1,189.50/oz from a close of $1,206/oz. Palladium was quoted at $322.50/oz, down $7 from Friday's close.

Barrick Gold Corp., the world's biggest gold producer, extended its bid for Pioneer Metals Corp. to Nov. 30.

Toronto-based Barrick said today in a statement distributed by CCNMatthews that it has acquired 59.1 million shares of Pioneer. Barrick had 58.6 million shares of Vancouver-based Pioneer on Oct. 20, when it last extended the offer.

Barrick became the world's largest gold producer in March after completing the acquisition of Placer Dome. Inc.

Gold in New York gained the most since June on speculation that China will boost purchases of the precious metal to diversify its foreign-exchange reserves.

The dollar tumbled against the euro after Reuters reported the People's Bank of China may switch some of its currency reserves. Gold, sold in dollars, generally moves in the opposite direction of the dollar. The metal is up 23 percent this year while the U.S. currency fell 7.7 percent against the euro.

``China indicated many options are being considered, and the market is inferring some reserves will go into gold,'' said James Vail, who manages $800 million in natural-resource stocks at ING Investments LLC in New York.

Gold futures for December delivery rose $18.50, or 3 percent, to $636.80 an ounce at 1:25 p.m. on the Comex division of the New York Mercantile Exchange. A close at that price would mark the biggest gain for a most-active contract since June 30. Prices fell 1.5 percent yesterday.

``All central banks are trying to diversify,'' People's Bank of China Governor Zhou Xiaochuan said at a conference in Frankfurt. ``We have had a very clear diversification plan for several years.''

China is the tenth-biggest holder of gold reserves. About 1.3 percent of the country's reserves are gold and 72 percent of the reserves are U.S. assets. China's trade surplus with the U.S. helped drive the country's foreign currency reserves close to $1 trillion.

Dollar Weakness

``I'm worried about a weakening dollar and bullish on gold,'' said Thomas Au, principal at R.W. Wentworth & Co., a New York-based consulting company. ``Apparently, Mr. Zhou and company are, too.''

Gold opened higher as the euro rose earlier against the dollar on speculation the European Central Bank will raise interest rates faster than the Federal Reserve.

This year's 23 percent rally in gold would be the biggest since 2002, and prices have gained every year since 2001, moving in tandem with the euro from 2002 to 2004. Last year, gold gained 18 percent, even as the dollar rose 14 percent against the euro.

Gold also gained today on expectations international- investor demand for the dollar may drop after a shift in control of the U.S. Congress. Democrats took control of the House of Representatives after 12 years of Republican rule.

``With the change in Congress, and an inferred anti- business climate, the foreign investors are souring on the dollar,'' ING's Vail said.

`Inflationary Pressure'

Higher crude-oil prices also boosted gold's appeal as a hedge against energy costs, analysts said.

``When oil makes a big move up, it's going to be supportive for gold because of the inflationary pressures,'' said Tom Hartmann, a commodity broker at Altavest Worldwide Trading Inc. in Mission Viejo, California.

Oil rose as much as 2.4 percent to $61.26 a barrel today in New York after gaining 1.5 percent yesterday.

Gold and oil often move together. Gold futures touched $873 an ounce in January 1980 after oil costs doubled in a year, sparking a surge in the inflation rate.

Price charts also indicated gold may climb, some analysts said. The metal has traded above its 200-day moving average since Nov. 1.

``Gold has taken on a life of its own,'' said Matt McKinney, a commodity broker at Infinity Brokerage Services in Chicago. ``If it gets any help from a weaker dollar or stronger oil, that would surely catapult it.''

Gold futures rose early Thursday, recovering part of their prior-day more than
$9-an-ounce loss as energy prices firmed and some of the worry stemming from the changing power structure in Washington eased.

Gold for December delivery was last up $6.90 at $625.20 an ounce on the New York Mercantile Exchange. The contract closed lower Wednesday as traders reacted to the Democratic Party sweep of Congress by consolidating recent gains.

"Despite yesterday's pullback the outlook remains positive, with oil holding above $58/barrel and the potential impact on the dollar following Tuesday's mid-terms," said James Moore, analyst at TheBullionDesk.com.


Meanwhile, the dollar traded mixed against major currencies, gaining against the yen but falling against the euro, after the Commerce Department said the U.S. trade deficit narrowed by 6.8% in September to $64.3 billion. Economists had expected a deficit of $66.3 billion. The U.S. trade deficit with China widened to a record $23.0 billion.

Separately, the Labor Department said prices of imported goods dropped 2% in October. Economists had expected prices to drop 1%.
Silver futures were last up 14 cents at $12.69 an ounce. Platinum rose $24.70 to $1,192 an ounce and palladium was up $3.70 to $332.10 an ounce. Copper added 2.85 cents to $3.273 a pound.

On the supply side, gold inventories were down 64 troy ounces at 7.53 million troy ounces as of late Wednesday, according to Nymex data. Silver supplies rose by 570,336 troy ounces to 107.4 million and copper supplies rose by 159 short tons to 25,664 short tons.

Gold prices fell in New York as some investors bet a four-week rally was overdone.

Before today, gold had gained 8.8 percent since Oct. 6 amid speculation a decline in the value of the U.S. dollar would boost investor demand in the metal. Gold's 4.7 percent gain last week was the biggest since mid-July. The metal is up 20 percent this year.

``We're seeing people getting out of length instead of real sellers,'' said Michael Guido, director of hedge-fund marketing at Societe Generale in New York. ``We've had a $56 rally so we're seeing some technical profit-taking in gold.''

Gold futures for December delivery fell $3, or 0.5 percent, to $624.70 an ounce at 10:45 a.m. on the Comex division of the New York Mercantile Exchange. Prices were little changed yesterday after dropping 0.2 percent the previous day.

A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.

The seven-day relative strength index for gold futures has been above 70 the past six days, a signal to traders who look at historical charts that prices are poised to fall.

``Gold had a big move last week,'' said John Reade, an analyst at UBS AG in London. ``The key thing is if it does continue to slip lower whether we see physical demand below $620. If we don't, then prices are going even lower.''

Gold will touch $670 in the next three months, up from the previous forecast of $640, UBS said yesterday.

The gold market failed to rally even after the Democratic Party took control of the U.S. House of Representatives in yesterday's elections after 12 years of Republican control. Analysts had expected a Democratic win to weaken the U.S. dollar, which was little changed in New York.

``Speculators had positioned themselves for a weaker dollar and stronger gold,'' said Carlos Perez-Santalla, gold trader and president of Hudson River Futures in New York. ``People are bailing out of the longs after the market didn't rally after the Democrats won.''

Gold, sold in dollars, generally moves in the opposite direction of the U.S. currency, which is down 6.2 percent against six major currencies, including the yen, the euro and the Canadian dollar.

Shares of gold miners were mixed in Wednesday afternoon trading, as Merrill Lynch upgraded Goldcorp Inc. and NovaGold Resources Inc. again rejected a takeover bid from Barrick Gold Corp.

The overall CBOE Gold Index was down three-quarters of a percent, with six of 10 component stocks declining. Most percentage swings were slight, under 2 percent.

Gold for December delivery slipped $3.30 to $615 per ounce on the New York Mercantile Exchange.

Shares of Barrick lost 98 cents, or 3.3 percent, to $29.18 on the New York Stock Exchange.

The world's largest gold producer extended its offer of $16 per share for NovaGold to Nov. 21. NovaGold again urged shareholders to reject the offer, calling it undervalued.

The index's other big decliners were Freeport-McMoRan Copper & Gold Inc., down $1.73, or 2.9 percent, to $59, and Harmony Gold Mining Co., lost 45 cents, or 2.9 percent, to $15.22. Both trade on the NYSE.

Shares of Goldcorp, meanwhile, fell 13 cents to $26.30 on the NYSE, despite an upgrade from Merrill Lynch.

Analyst Michael Jalonen boosted the stock to "Buy" from "Neutral" and set a price target of $34, following its merger with Glamis Gold. In a research note, Jalonen wrote the newly combined gold producer will be the world's third largest by market capitalization and will benefit from above-average production growth and below-average cash costs.

RBC Capital Markets analyst Michael Curran kept his "Outperform" rating on Goldcorp, while writing in a research note that the new company has the best growth profile among tier one global gold producers.

Gold gained in Asia after Iran yesterday tested new cannon and rockets, increasing the precious metals appeal as a haven.


Gold for immediate delivery rose as much as $3.2, or 0.5 percent, to $626.40 an ounce. It traded at $624.80 at 11:20 a.m. Mumbai time.

``I could imagine we would see the $1,000 an ounce price in the next six to 12 months,'' said Christian Baha, founder and owner of Monte Carlo-based Superfund Asset Management GmbH. ``After a nice correction, I believe gold will go ahead with the bull market.''

Gold is trading 12 percent below its 26-year high of $730.40 an ounce.

Volumes are less than normal today as market makers and gold traders in Australia turn their attention to the annual Melbourne Cup horse race, said Investec's Heathcote. Melbourne, the second-biggest city in Australia, is closed for a public holiday for the race.

`Profit-Taking'

Analysts including Si Kannan expect there to be selling pressure once gold rises above $627 an ounce today.

``There will be some profit-taking at these levels,'' said Kannan, an analyst at Mumbai-based Sharekhan Commodities Pvt.

Gold futures for December delivery declined $0.5, or 0.1 percent, to $627.50 an ounce in after-hours trading on the Comex division of the New York Mercantile Exchange at 10:36 a.m. Mumbai time.

Bullion for October 2007 delivery declined 16 yen, or 0.7 percent, to 2,395 yen a gram, or 74,484 yen ($632) an ounce on the Tokyo Commodity Exchange at 2:29 p.m. local time.

In India, the price of the metal for December delivery fell 11 rupees, or 0.1 percent, to 9,137 rupees per 10 grams, or 28,416 rupees ($634) an ounce, at 10:56 a.m. Mumbai time on the Multi Commodity Exchange.

Gold rallied on speculation a decline in the value of the dollar will boost the metal's appeal as an alternative investment.

Gold, sold in dollars, generally moves in the opposite direction of the U.S. currency, which fell today against the yen on speculation Japan may raise interest rates. Gold is still up 21 percent this year, while the dollar has fallen 6.4 percent against six major currencies.

``The dollar is still a big influence on gold,'' said Frank Lesh, a trader at FuturePath Trading LLC in Chicago. ``If you're watching gold, you need to watch the dollar.''

Gold futures for December delivery rose $2.60, or 0.4 percent, to $630.50 an ounce at 10:23 a.m. on the Comex division of the New York Mercantile Exchange. Prices gained 4.7 percent last week.

Bank of Japan Governor Toshihiko Fukui today pledged to ``take action in advance'' on monetary policy, suggesting the bank will increase its key interest rate from 0.25 percent. The central bank raised rates in July for the first time in almost six years. Federal Reserve officials have kept the benchmark U.S. interest rate unchanged at 5.25 percent for three consecutive meetings after a two-year tightening campaign.

``Holding the rate steady is giving us time to assess the full impact of our 17 rate increases and to see how economic conditions unfold over the near term,'' Cleveland Federal Reserve Bank President Sandra Pianalto said yesterday.


The Fed is trying to slow inflation without damaging an economy that expanded in the third quarter at the slowest pace since 2003.

A rate cut would weaken the dollar and send gold higher. Gold has made annual gains every year since 2001, more than doubling in the past five years. The dollar index rose last year, after three consecutive annual declines, as the Fed boosted rates to damp inflation.

``The Fed is neutral with a tightening bias,'' Lesh said. ``That's supportive for the dollar. But staying neutral isn't bad for gold.''

Still, gold has fallen 14 percent from a 26-year high of $732 on May 12. Some analysts remain skeptical gold can touch the May high again this year.

``Gold would still have to vault over $642 in order to yield a fresh sense of its year-end potential,'' said Jon Nadler, an investment-products analyst at Kitco Inc. ``After four solid weeks of gains, there may be a pause in the making.''

Gold has gained 8.9 percent since Oct. 6.

Gold moved higher on Tuesday to trade near two-month highs, supported by a weaker dollar, but investors remained cautious about building big positions ahead of U.S. congressional elections, dealers said.

Spot gold hit a high for the day of $626.25 an ounce and was quoted at $625.10/626.10 by 1106 GMT. It closed at $623.70/624.70 in New York late on Monday, when it touched $629.40 -- the highest since September 7.

"We have broken some key resistance in gold. We have held above that resistance and I think the medium-term prospect for gold -- the next two to three weeks -- is pretty good," said John Reade, London-based analyst at UBS Investment Bank.

"The best guess here is a period of consolidation for a few days. I don't see the ingredients in place to drive gold massively higher, anyway, simply because most of the investors are staying on the sidelines at the moment."

Gold probably needed more dollar weakness to move much higher this year, he added.

The dollar fell toward last week's one-month low of $1.2798 per euro and was last quoted at $1.2755 on jitters before U.S. congressional elections.

"Gold's recent correlation with oil and also with the dollar could generate further buying interest should further favorable movements emerge," James Moore, analyst at TheBullionDesk.com, said in a daily note.

Gold has jumped more than nine percent in the past two weeks, hitting physical demand for the metal in key consuming centers.

Relatively lower prices for most of October saw sales for Dubai's gold industry jump 25 percent during the month from a year earlier, the chairman of a gold and jewelry trade group in the Gulf emirate said.

PLATINUM DROPS

In other metals, platinum dropped to $1,172/1,177 an ounce from $1,190/1,195 in New York. On Friday, platinum spiked to its highest since September 11 at $1,213 on talk of a new platinum exchange-traded fund.

"Speculation over the possible launch of a platinum ETF has faded and that prompted profit-taking, but I think platinum will be supported as such speculation will stay," Takasahi Ogura, a manager at Kanetsu Asset Management, said.

Dealers will turn to next week's report by Johnson Matthey, the world's largest distributor of platinum, for clues on the demand-supply balance.

Palladium fell to $327/332 an ounce from $331/336, while silver edged down to $12.57/12.64 an ounce from $12.65/12.72.

These 1 month charts of NYMEX Gold Dec 2006 and NYMEX Silver 2006 show a dramatic price increase over the past month. Precious metal prices are often a leading indicator of future economic and/or political uncertainty.

Shares of gold miners were mixed in Monday afternoon trading, as an analyst downgraded Barrick Gold Corp., and Kinross Gold Corp. announced a $3.1 billion acquisition of a rival Canadian miner.

The overall CBOE Gold Index was flat, with seven of its 11 component stocks marking gains. Most percentage swings were slight, under 2 percent.

Hurting shares was the December gold contract falling $1.30 to $627.90 an ounce on the New York Mercantile Exchange.

BMO Capital markets analyst Geoff Stanley also downgraded Barrick Gold, the world's largest gold producer, to "Market Perform" from "Outperform." In a research report, Stanley wrote that he is cutting his target price to $38 from $42, due to expectations of higher 2007 cash costs and weakening medium-term production.

Barrick's U.S.-listed shares lost 47 cents to $30.40 on the New York Stock Exchange.

Canadian gold miner Kinross Gold Corp. said it's buying competitor Bema Gold Corp. in an all-stock deal valued at $3.1 billion. Kinross' U.S.-listed shares fell $1.07, or 8 percent, to $12.19 on the NYSE.

Bema's U.S.-listed shares jumped 52 cents, or 10.9 percent, to $5.30 on the NYSE, outside the index.

Among other big gainers in the index, U.S.-listed shares of South Africa-based miner Gold Fields Ltd. rose 43 cents, or 2.5 percent, to $17.90 on the NYSE.

Meridian Gold inc.'s stock added 63 cents, or 2.4 percent, to $26.43 on the NYSE.