Gold Futures Higher, Nearing $400

Metals mining indexes close at lowest level in a week
SAN FRANCISCO , May 3 - Gold futures closed higher Tuesday, but the yellow metal's failure to tap the key $400 level and weakness in silver pulled indexes for mining shares to their lowest levels in a week.

"A stab through $400 seems imminent, but without a sinking U.S. dollar, a sustainable and sizable gold rally isn't a likely scenario anytime soon," said Erik Gebhard, president of Altavest Worldwide Trading.

A rise in factory growth and strength in construction spending in the U.S. pulled the dollar higher against the Japanese yen, though strength in crude kept the greenback lower against the euro.

Gold for August delivery traded as high as $399.80 an ounce on the New York Mercantile Exchange, its loftiest level since April 27. But it closed at $395.50, up 60 cents for the session.

Prices will likely test the $400 level in the coming sessions, said James Moore, an analyst at TheBullionDesk.com.

"With the market edging nearer to June's FOMC meeting and ... the rate hike speculated over the past months, traders focus will turn increasingly toward U.S. economic data and the currency markets reactions," he wrote in a note to clients.

"Fresh violence in the Middle East ... and bomb attacks in Pakistan will continue to encourage an element of safe-haven buying," he added.

For now, gold's failure to reach the $400 level weighed on mining shares and pulled indexes to one-week lows.

The Amex Gold Bugs Index fell back 1.8 percent to close at 196.25 after briefly climbing as high as 203.18.

The Philadelphia Gold and Silver Index slipped 1.6 percent to close at 88.38, while the CBOE Gold Index closed at 78.83, down 1.4 percent.

Back on Nymex, other metals futures were mixed. July copper tacked on 1.5 cents to close at $1.2925 per pound, and July platinum gained ground, adding $13.30 to end the session at $842.50 an ounce

But July silver closed at $6.055 an ounce, down 5.5 cents and September palladium lost $5.45 to close at $254 an ounce.

As for storage levels, copper supplies were down 1,438 short tons at 131,818 short tons, according to Nymex. Silver stocks were down 594,287 troy ounces at 118.5 million troy ounces.

Gold inventories stood at 4.39 million troy ounces, down 105 troy ounces from the previous day.

Myra P. Saefong is a reporter for CBS.MarketWatch.com in San Francisco.

By Myra P. Saefong
Source: CBS.MarketWatch.com