Gold futures climbed toward $409 an ounce Tuesday, with a record U.S. current account deficit and a decline in August's retail sales prompting weakness in the dollar.
"Shorter term, gold as well as the euro are most likely anticipating additional weak economic reports for the rest of the week, which would bring more dollar selling," said Dale Doelling, chief market commentator at Bullion.com in Chicago.
The nation's second-quarter current-account deficit widened to a record $166.2 billion from $147.2 billion in the first quarter, the Commerce Department said Tuesday. See full story.
And retail sales fell 0.3 percent in August, the third decline in the past five months, according to a separate Commerce Department report. See full story.
Following the data, the dollar lost ground against the euro and yen. See Currencies.
Gold could also be reacting to the rally in crude prices due to the threat of Hurricane Ivan in the Gulf of Mexico, Doelling said.
Gold for December delivery rose to a session high $409 an ounce on the New York Mercantile Exchange, a level not seen since Sept. 2. The contract was last at $408.50, up $2.50.
Gold is "feeling the pinch from talk of higher interest rates, and investors are flocking to the yellow metal as a safe haven," said Kevin Kerr, a senior trader at Kwest International.
Disappointing U.S. economic data issued Tuesday won't likely stop Fed officials from increasing their target lending rate next week, according to Ian Sheperdson of High Frequency Economics.
Elsewhere on the metals market, December silver rose 8 cents to trade at $6.295 an ounce, while December copper traded at $1.267 a pound, down 1.8 cents.
The October platinum contract stood at $845 an ounce, up $1.20, while December palladium rose $2.45 to $213 an ounce.
Tracking inventories, copper supplies were down 843 short tons at 56,040 short tons as of late Monday, according to the Nymex. Silver stocks were unchanged at 110.3 million, while gold inventories stood at 4.89 million troy ounces, up 3,119 from the previous day.
In equities, mining shares again traded mainly higher, on the heels of a three-session winning streak.