Bill O’Neill, managing partner of New Jersey-based LOGIC Advisors, said that asset-diversification demand for gold and other precious metals by jittery investors amid shaky equities markets propelled gold’s rally.

Spot gold hit an intraday peak of $992.55, which marked the highest price since Feb. 24. It was at $989.10 an ounce at 12:07 p.m. EDT (1607 GMT), against $976.60 an ounce late in New York on Wednesday.

U.S. December gold futures were up $10.70 at $989.20 an ounce on the COMEX division of the New York Mercantile Exchange.

Fears that U.S. payrolls data may disappoint sparked a flight to quality among investors on Wednesday. The metal broke out of its previous $930-$960 range as a move through technical resistance above $960 sparked a rally.

VTB Capital analyst Andrey Kryuchenkov said gold’s immediate move had been largely technical, with the dollar offering little support and physical demand weakening as prices rose.

Gold will need to hold its current levels to build a base for further gains, he said. “If we close above $980, we will retest $990, and probably stay in this range,” he said.

The dollar index <.DXY>, which measures the U.S. currency’s performance against a basket of six major currencies, initially softened early on Thursday, boosting interest in gold as an alternative asset and driving prices to fresh highs.

The market was awaiting fresh clues on the economic outlook from Friday’s payrolls numbers. Investors were spooked after a U.S. employment report released on Wednesday showed more private sector job losses than expected.

The data will be closely watched for its impact on the dollar, and its subsequent effect on gold. The metal is set to benefit from renewed demand if the U.S. currency slips further.

STRONG INVESTMENT

“Investment demand for gold is still very strong, and that is going to help drive the price higher over time,” said Helen Henton, head of commodities at Standard Chartered. “We think it’s going to break $1,000 by Q4, mainly driven by a weakening U.S. dollar.”

Silver tracked gold higher to reach its highest level since June at $15.92 an ounce, and was at $15.84, against $15.34 on Wednesday.

It outpaced base metals such as copper, with which silver, as an industrial as well as an investment metal, often moves.

“Silver has fully participated in this (rally) and yet, while base metals have picked up a bit in the last 18 hours, they were definitely on the defensive,” said Stephen Briggs, an analyst at RBS Global Banking & Markets.

“Silver has managed to ignore that, which is interesting.”

Among other precious metals, platinum was at $1,244 an ounce against $1,229, while palladium was at $288.50 against $284.50.

Impala Platinum, the world’s second largest miner of the metal, said on Thursday some workers at its operations had returned to work after a strike, but said no wage deal had been reached with the union.

Sept 3 (Reuters)

• China’s central government said yesterday (Thursday) that this week’s earthquake in Sichuan ultimately could result in 50,000 deaths, and catastrophe-modeling firms are estimating the disaster will trigger losses of up to $20 billion, MarketWatch.com reported. Monday’s quake – which measured 7.9 in magnitude – is throwing a “harsh spotlight” on the widening gap between the rich and poor in China, particularly since the losses incurred by the country’s lower-wage classes were mostly not covered by insurance, The Wall Street Journal reported.

• The number of U.S. workers filing for initial jobless benefits increased slightly more than expected in the week ended May 10, the Department of Labor said yesterday (Thursday). First-time jobless claims rose to 371,000, up from 365,000 for the week prior. Economists surveyed by Reuters had forecast the number of new claims at 370,000. The four-week moving average of new claims, considered by economists a more reliable gauge of labor trends, fell to 365,750 in the week ended May 10.

• CBS Corp. (CBS) announced yesterday (Thursday) that it would pay $1.8 billion to acquire CNet Networks Inc. (CNET) in a move expected to help CBS establish a foothold in new advertising markets while also helping with its effort to gain a higher profile on the Internet. CBS will pay $11.50 a share for the online provider of technology news and product reviews, a 45% premium to the price CNet traded at prior to the deal’s announcement, MarketWatch reported.

• General Motors Corp. (GM) yesterday (Thursday) reached a tentative deal with striking workers at a plant in Delta Township, Mich., in what might be the first step towards ending a month-long walkout. However, the strike at the Delta Township factory won’t end until the tentative agreement is ratified, Dow Jones Newswire reported.

• At a conference on bank structure and competition in Chicago, U.S. Federal Reserve Chairman Ben S. Bernanke told banks to hold “generous” capital cushions and actively raise money. “I strongly urge financial institutions to remain proactive in their capital-raising efforts,” Bernanke said. The Fed chair added that he has been encouraged by the success of many banks in raising new capital and he praised foreign-owned sovereign wealth funds for the positive role they were playing as suppliers of badly needed capital.

• U.S. industrial output fell by 0.7% in April from the month before, when output was up 0.2%, the Federal Reserve said. The latest drop was twice that forecast by analysts. The automotive sector saw its biggest drop in nearly a decade as consumer demand for new cars slowed, and a strike at General Motors cut output.

• First-quarter profit for J.C. Penney Co., Inc. (JCP) dropped 50% from last year, but beat Wall Street expectations, causing the department store operator’s shares to rise more than 4% yesterday (Thursday). “I think it’s good news in the sense that things have stabilized. It doesn’t appear to be getting worse,” Wayne Hood, a retail analyst with BMO Capital Markets, told Reuters.

• A multibillion-dollar housing rescue package is close to being resolved, two members of the U.S. Senate Banking Committee said yesterday (Thursday). “We’re very, very close,” Panel chairman Sen. Chris Dodd (D-Conn.) told CNBC. “There’s really maybe one or two issues – maybe only one that’s outstanding here that we need to resolve.”

Source: Global Investing Roundups: Friday, May 16th, 2008