Gold rallies

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Gold rallies in tandem with higher oil ,waker dollar also gives precious metal leeway for gains.

Gold futures rose sharply early Monday, as oil prices climbed on signs that Iran's set to reject a United Nations demand that it cease enriching uranium for its nuclear program.

Gold for December delivery was last trading up $9.30 at $631 an ounce, recouping part of the nearly $23 loss recorded last week as easing Middle East tensions and inflation concerns undercut demand for the metal as a safe-haven investment and inflation hedge.

Crude futures gained 72 cents, or 1%, to $71.86 a barrel in early electronic trading. Iran returned to the headlines over the weekend, with the country's foreign ministry saying the suspension of uranium enrichment won't be on the agenda when Iranian negotiators sit down with western governments.

Tehran's expected on Tuesday to formally reject a package of incentives to stop enriching uranium. In July, the U.N. passed a resolution that gives Iran an Aug. 31 deadline to halt its activities or face unspecified sanctions.

Meanwhile, the Iranian army tested surface-to-sea missiles over the weekend, according to news reports.

BY

Gold rallies in tandem with higher oil ,weaker dollar also gives precious metal leeway for gains.

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NEW YORK (MarketWatch) -- Gold futures rose sharply Monday, as oil prices climbed on signs that Iran's set to reject a United Nations demand that it cease enriching uranium for its nuclear program.
Gold for December delivery was last trading up $12.80 at $634.50 an ounce on the New York Mercantile Exchange, recouping part of the nearly $23 loss recorded last week as easing Middle East tensions and inflation concerns undercut demand for the metal as a safe-haven investment and inflation hedge.
Demand from physical buyers, who were largely absent last week, was another support, according to Jon Nadler, investment analyst at bullion dealer co.com.
"Although the repair process remains tentative and the market could still reverse course if prices are deemed either too lofty or simply unsustainable, the stabilization is welcome after several turbulent weeks," he said.
Crude futures gained 72 cents, or 1%, to $71.86 a barrel in early electronic trading. Iran returned to the headlines over the weekend, with the country's foreign ministry saying the suspension of uranium enrichment won't be on the agenda when Iranian negotiators sit down with western governments.
Tehran's expected on Tuesday to formally reject a package of incentives to stop enriching uranium. In July, the U.N. passed a resolution that gives Iran an Aug. 31 deadline to halt its activities or face unspecified sanctions.
Meanwhile, the Iranian army tested surface-to-sea missiles over the weekend, according to news reports.
"It is seen as a hint concerning the ability of Iran to close the Straits of Hormuz," said UBS analyst Jon Rigby, referring to the key waterway at the mouth of the petroleum-rich Persian Gulf.
A weaker dollar also fueled gold's gains. The dollar was down by 0.6% against the euro and by 0.7% against sterling, reflecting expectations that there will be more rate hikes in Europe than the U.S. for the rest of the year.
Specifically, the European Central Bank is expected to raise interest rates as many as two more times by the end of the year, while there are growing convictions in the market that the Federal Reserve may continue to keep key U.S. benchmark rates at 5.25% following tame inflation data.
Peter Grandich, editor of The Grandich Letter, said technically, gold is set up for a run to new yearly highs above $735 an ounce before the end of the year, after establishing a bottom above the psychologically key $600 level.
"The combination of a terminally ill U.S. Dollar (which should see an accelerating decline towards its last line of defense of 80 basis the U.S. Dollar Index), and a failed attempt to cap gold by a group (or groups) who have been heavily shorting and manipulating gold in hopes of breaking its uptrend, have all combined to set gold up for one of its best rallies in a long time," he said.
Also early Monday, silver futures rose 40 cents to $12.43 an ounce, platinum added $16.40 to $1,240.50 an ounce and palladium was up $6.45 at $340.75 an ounce.
Copper added 4.6 cents to $3.48 a pound, as labor unrest continued at the Escondido mine in Chile.
On the supply side, gold inventories were down by 97 troy ounces to 8.18 million troy ounces as of late Friday, according to Nymex data.
Silver supplies dropped by 65,300 to 103.2 million troy ounces and copper supplies rose by 556 short tons to 7,511.
Indexes that track metals and mining stocks were also higher. The Philadelphia Gold and Silver Exchange Index (XAU : phlx gold silver index capital-weight
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Last: 144.39+3.62+2.57%

10:19am 08/21/2006

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XAU144.39, +3.62, +2.6%) was last up 2.2% at 143.83, the CBOE Gold Index (GOX : CBOE Gold Index
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Last: 145.73+4.02+2.84%

10:19am 08/21/2006

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GOX145.73, +4.02, +2.8%) was up 2.8% at 145.60 and the Amex Gold Bugs (HUI : amex gold bugs index equal-$ weight
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Last: 337.37+10.24+3.13%

10:19am 08/21/2006

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HUI337.37, +10.24, +3.1%) was up 3.1% at 337.16.  
Ciara Linnane is markets editor for MarketWatch in New York.

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Crude gains as Iran defies U.N. demands

PrintE-mailDisable live quotesRSSDigg itDel.icio.usBy Myra P. Saefong, MarketWatch
Last Update: 10:27 AM ET Aug 21, 2006


SAN FRANCISCO (MarketWatch) -- Crude-oil futures rose Monday morning, on track to mark a second session of gains after Iran vowed not to submit to United Nations demands that it stop enriching uranium, reigniting concerns about prospects for supply disruptions tied to the world's No. 4 oil producer.
"We know that Iran is just not going to give in to the world community regarding their nuclear pursuits, so we will have to have a floor for oil," said Phil Flynn, a senior analyst at Alaron Trading, adding that he believes oil prices have seen their low for the year.
"The risk premium for oil will increase at some point as the ... Iranians may at some point try to make their point by using oil as a weapon," he said.
Crude for September delivery was last up 51 cents, or 0.7%, at $71.65 a barrel on the New York Mercantile Exchange, after trading as high as $71.80. The contract closed higher Friday but lost 4% on the week as traders moved to unwind part of the risk premium that had built up during the conflict between Israel and the Hezbollah militia group in southern Lebanon.
September heating oil was also up 2.15 cents at $2.011 a gallon, but September unleaded gasoline fell by 2.19 cents to $1.945 a gallon after climbing 1.8% on Friday.
"Suggestions of oil's demise may be exaggerated," said Citigroup analyst James Neale.
In the past two weeks, oil prices have lost a full 10% of their value, generating speculation that the long-term bull run in the commodity market may be nearing an end. Bearish investors have cited signs of high petroleum inventories around the world and threats to demand from high oil prices as two factors damping prices.
However, there are also bullish factors to consider, Neale said.
"Demand indicators are 'in-line' with expectations, but not exceeding it," he said. "Geopolitical indicators continue to be worrying, with Nigeria, Venezuela, Iran, Iraq and Lebanon all appearing, to us, to be some distance from resolution.
"Finally, the supply side of the equation remains the key bullish support," Neale told investors. Underscoring this, he said, was the "poor showing" turned in recently by the bulk of international oil companies in terms of production growth indicators.
Iran returned to the headlines over the weekend, with the country's foreign ministry saying the suspension of uranium enrichment will not be on the agenda of talks when Iranian negotiators sit down with western governments.
Tehran is expected on Tuesday to formally reject a package of incentives to stop enriching uranium. In July, the U.N. passed a resolution that gives Iran an Aug. 31 deadline to halt its activities or face unspecified sanctions.
Meanwhile, the Iranian army tested surface-to-sea missiles over the weekend, according to news reports.
"It is seen as a hint concerning the ability of Iran to close the Straits of Hormuz," said UBS analyst Jon Rigby.
In other developments in the Middle East, U.N. Secretary General Kofi Annan said an Israeli raid deep inside Lebanon on Saturday violated the ceasefire that went into effect last week, the BBC reported.
Israel said it was aiming to disrupt weapons supplies from Iran and Syria to Hezbollah, and insisted the truce held.
And from Nigeria, there was news that a German oil worker kidnapped by an armed group two weeks ago has been freed. Nigerian police said they have arrested more than 100 people in raids in the Niger Delta, where a group aiming to keep more of the African country's oil money within Nigeria has carried out a series of kidnappings of foreign oil workers.
Also making headlines, BP (BP : bp plc sponsored adr
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10:12am 08/21/2006

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BP70.68, +0.71, +1.0%) is being probed by U.S. environmental investigators into allegations that it manipulated inspection data to avoid replacing pipelines at Prudhoe Bay, Alaska, the Financial Times reported Monday.
BP denies those allegations, according to the newspaper, which cited unnamed workers. Alaska Attorney-General David Marquez has also issued a subpoena for BP to preserve all documents related to the field, the report added.
Elsewhere in energy trading Monday, natural-gas futures were little changed after dropping more than 7% in value last week. The September contract was last at $6.74 per million British thermal units, up 0.9 cent.
In equities, benchmarks tracking stocks in the oil and gas sectors rose Monday, with the Amex Oil Index ($XOI : amex oil index
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Last: 1,199.01+11.15+0.94%

10:31am 08/21/2006

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$XOI1,199.01, +11.15, +0.9%) gaining the most ground. See Energy Stocks.
And in metals trading, gold futures reclaimed the $630-an-ounce level in an effort to recoup part of last week's loss of 3.5%. See Metals Stocks.
Taking a broad measure of the commodity-futures markets, the Reuters/Jefferies CRB Index stood at 333.81 points, up 0.5%. See more of the latest prices for commodity futures.  
Myra P. Saefong is a reporter for MarketWatch in San Francisco.