Metals - Gold rises after signs emerge US economy is stronger

Metals - Gold rises after signs emerge US economy is stronger

	Published : Tue, 20 Mar 2007 14:58 By : Agencies Print this Story

LONDON (AFX) - Gold rose after the US reported better than expected housing data, which investors saw as a sign of a healthy economy.

The Commerce Department reported construction of new homes and apartments rose by 9 pct in Feb to a seasonally adjusted annual rate of 1.525 mln units.

That represented a better-than-expected rebound after construction activity had plunged by 14.3 pct in January to the slowest pace in more than nine years.

Explaining why the news lifted the price of gold, Jon Nadler, Kitco analyst said: 'It is better to have a healthy economy for a buoyant price. Gold rose immediately after the housing data was released.'

He added a weaker economy -- which has been seen of late -- would suppress demand for gold, and indeed all metals.

At 1.38 pm, gold was at 659 usd per ounce, up from 653.60 usd seen in late New York trade yesterday. Earlier the precious metal touched 660.70 usd per ounce -- which most analysts agree is a key resistence level.

Also underpinning gold, traders were wary ahead of the US interest rate verdict tomorrow.

The FOMC's two-day meeting on interest rates starts today, with analysts looking for any hint from the central bank over where rates are headed in the coming months.

Although most expect the committee to leave rates unchanged when they announce their decision tomorrow, cuts are expected later this year, which would pressure the dollar downwards. If proven correct, gold would rise as it's seen as an alternative investment to a softer dollar.

'If a rate cut is needed to keep the economy going, the precious metals sector will be a significant beneficiary of that move,' said Neal Ryan, head of research at Blanchard Economic Research Unit.

Elsewhere, gold was up in line with strong energy prices, as investors hedged against oil led inflationary pressures. Oil was up ahead of US data, due to be released tomorrow, which is expected to show gasoline stocks fell last week.

Among other precious metals, platinum was at 1,229 usd, slightly off yesterday's high of 1,230 usd, palladium was at 348 usd, and silver stood at 13.29, up from a high of 13.20 usd in late New York trade yesterday.

anealla.safdar@thomson.com

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