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Gold futures extend advance to a fourth session

SAN FRANCISCO (MarketWatch) -- Gold futures closed higher Wednesday, extending their advance to a fourth session, as traders gauged prospects for further quantitative easing by the Federal Reserve and other central banks.

Prices found support in data that showed U.S. retail sales fell and producer prices saw their biggest one-month drop in almost three years in May, which helped drive safe-haven demand for the metal.

Gold for August delivery (GCQ2) rose $5.60, or 0.4%, to settle at $1,619.40 an ounce on the Comex division of the New York Stock Exchange. It's scored a four-session gain of 2%.

Futures prices traded lower around $1,612 before the economic data were released, climbed immediately afterward only to briefly trade lower and recover again. Gold closed at $1,613.80 an ounce Tuesday, building on a winning streak that began at the end of last week.

There has been growing speculation that further QE, or quantitative easing, and possibly coordinated QE from the Fed as well as the Bank of England, the European Central Bank, the Bank of Japan and other central banks "may be embarked on soon," said Mark O'Byrne, executive director at GoldCore.

A "deepening crisis in the euro zone and slowing growth in the U.S. and internationally has raised the prospect of further QE," he said. Further QE is "gold bullish" and should see gold rise above its nominal record high above $1,900 an ounce, "possibly as soon as before the end of 2012."

Lack of conviction

Still, "unlike Tuesday, silver didn't follow gold higher today, signaling a lack of conviction short term," said Adrian Ash, head of research at BullionVault.

Silver for July delivery (SIN2) ended a bit lower, down less than 1 cent, or 0.03%, at $28.94 an ounce as market participants stepped to the sidelines after a 1.2% rally in the previous session.

Overall, the metals market has a lot to digest, including Sunday elections in Greece, record-high Spanish bond yields, and a weakening U.S. recovery, according to Ash.

On this latter point, Wednesday's economic data came as a disappointment, giving gold a boost.

Lower costs for food and energy pulled the U.S. producer price index down 1.0% in May, the Labor Department reported. Read about wholesale-level inflation.

Also, the Commerce Department said retail sales declined by 0.2% last month on a seasonally adjusted basis, marking a second-straight monthly decline after a revision to April's data. Read about retail sales.

"Gold is certainly holding price better than it did a few weeks ago, and a newer trendline, formed in early February, points to stability around the $1,600 level," said Richard Hastings, macro strategist at Global Hunter Securities. "But the trend is down."

July platinum (PLN2) settled at $1,466.80 an ounce, up $12.40, or 0.9%, while September palladium lost 95 cents, or 0.2%, to $623.30 an ounce.

July copper (HGN2) was little changed, up 0.1%, at $3.34 a pound.