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Gold futures climb as much as $5 an ounce

Gold futures climbed as much as $5 an ounce Tuesday, trading inversely with weakness in the US dollar on the heels of US economic data, which showed that consumer inflation eased in April.

Gold for June delivery was last up $4.10 at $674.20 an ounce on the New York Mercantile Exchange after trading at a three-session high of $675. The consumer-price index increased 0.4% in April, the Labor Department reported Tuesday. Economists surveyed by MarketWatch were expecting the CPI to rise 0.5% in April. Excluding food and energy, the core consumer price index rose 0.2%, as expected, cutting the annual gain in the core down to a one-year low of 2.3%.

The CPI figures "showed inflation was moderating across the board, with the exception of gasoline prices," said Neal Ryan, director of economic research at Blanchard, in e-mailed commentary. "The markets should take this as another cue for the Fed to begin looking to ease rates instead of keeping them steady or possibly raising interest rates to combat inflation." Separately, the Federal Reserve Bank of New York said its Empire State Manufacturing index rose to 8.0 in May from 3.8 in April.

Readings over zero indicate expansion. This is the index's highest level since February. Against this backdrop, the dollar lost ground against both the yen and euro, fueling investment demand for gold. Strength in oil prices, which sparked concerns over the economy, also contributed to gold's climb Tuesday. June crude climbed above $63 a barrel for the first time since May 4. On Monday, the benchmark gold contract declined $2.20 an ounce, though it was copper futures that registered the biggest loss, down 3% to mark the lowest closing level in more than five weeks in what analysts dubbed as consolidation unfolding on the heels of a nearly one-year high in prices seen earlier this month.

On Nymex Tuesday, copper recouped some ground. The July contract was last up 4.3 cents at $3.54 a pound. Other metals prices were mixed. June palladium fell $1.70 to $359 an ounce while July platinum tacked on $5.50 to $1,334.80 an ounce. Prices for the platinum group metals declined Monday after a report released Monday from metals refiner Johnson Matthey said palladium demand fell in 2006 and the market ended the year with a surplus of supplies. The report also said that global platinum supplies outpaced consumption in 2006 for the first time in eight years.

Silver shine
Meanwhile, July silver followed gold higher, trading 8.5 cents higher at $13.32 an ounce on Nymex. The "2007 Silver Yearbook," issued by researchers CPM Group late Monday, painted a "bullish picture for the silver market as surging investment demand and lower mine supplies easily negated lower industrial demand," James Moore, an analyst at, said in a research note. Jon Nadler, metals analyst at Kitco Bullion Dealers, also cited the CPM Group report, pointing out that global investors, for the first time since 1989, were net buyers of silver during 2006.

"This development is seen by CPM as being as important to the silver market as our oft-cited gold market news that since 2005 investors own more gold than all central banks put together," Nadler said in e-mailed commentary. On the supply side, gold warehouse inventories fell 5,134 troy ounces to stand at 7.71 million troy ounces as of late Monday, according to Nymex data. Silver supplies rose by 1.19 million troy ounces to reach 132.65 million troy ounces, while copper supplies were unchanged at 31,529 short tons. Indexes tracking the metals sector headed higher Tuesday, in a move to recoup at least part of the previous session's losses. (