PRECIOUS METALS: Gold futures rise on stronger oil, weaker dollar

Gold for December delivery climbed $11.10, or 1.4 percent, to close at $816.80 an ounce on the New York Mercantile Exchange. The precious metal had fallen to a low of $792 an ounce earlier, its lowest intraday level since October.

On Monday, gold rebounded from last week's drop of more than 8 percent and gained $13.60, or 1.7 percent, to close at $805.70 an ounce.

The metal followed oil prices higher Tuesday, with crude futures climbing to a high near $116 a barrel after a three-session decline of 2.7 percent.

"The primary trends in oil and the dollar remain up and down, respectively -- which should result in gold being well supported above $750 per ounce," said Mark O'Byrne, a director at Gold and Silver Investments Ltd.

"While oil may continue to sell off, few expect it to fall much below $100, levels considered extremely high only a few short months ago," he said.

"More consolidation in the gold market looks necessary and a weekly close above $850 will be needed prior to the primary trend reasserting itself," he said.

Dollar Trading

The dollar erased earlier gains, loosing as much as 0.7 percent against the euro. Gold reached a record in March as interest-rate cuts drove the euro to an all-time high against the U.S. currency.

A weakness in the greenback boosts the investment appeal for gold. The dollar index, which tracks the dollar against a trade-weighted basket of six major currencies, was at 76.85, down from 77.070 late Monday. It climbed as high as 77.41 during the day.

Meanwhile, the Labor Department reported Tuesday that U.S. producer prices rose by a bigger-than-expected 1.2 percent in July, driven higher by prices for energy, cars, food and other products.

In another report, the Commerce Department estimated that U.S. home builders sharply reduced the number of new homes started in July and dropped the number of new single-family permits to the lowest level in 26 years.

Other precious metals were mixed. Silver futures for December delivery gained 0.3 cent to $13.22 an ounce after earlier dropping to $12.52. Platinum's October contract closed down 3.1 percent, or $42.60, at $1,351.30 an ounce. September palladium futures lost $3.05 to close at $283.85 an ounce.

The Reuters/Jefferies CRB Index a benchmark gauging the prices of major commodities gained 1.3 percent.