NEW YORK (TheStreet ) - Gold prices were flirting with $1,800 an ounce Tuesday as a weaker U.S. dollar and safe haven buying supported the metal.
Gold for December delivery was adding $5.40 at $1,796.50 an ounce at
the Comex division of the New York Mercantile Exchange. The gold price
has traded as high as $1,798.60 and as low as $1,785.10 an ounce while
the spot price was down $2.80, according to Kitco's gold index.
Silver prices were rallying 27 cents at $35.10 an ounce while the U.S. dollar index was down 0.5% at $76.63.
Investors were ramping up their gold positions as Italy's Parliament
voted for 2010 budget items, which had been dubbed a de facto confidence
vote for embattled Prime Minister Silvio Berlusconi, but there was no
majority. Any sort of decisive action -- either Berlusconi retains power
or a new government takes up the helm -- removes uncertainty and is
positive for the euro, which weighs on the dollar and boosts gold.
In times of complete turmoil and chaos, the dollar will still shine
as the ultimate place to stash cash, while many investors sell gold for
cash. But potential stability mixed with fear, like the Eurozone is
mired in currently, is a perfect mix for gold.
The popular gold exchange traded fund SPDR Gold Shares(GLD_)
added 10 tons Monday. James Moore, research analyst at FastMarkets.com
says that this proves investors are interested in gold as a safe haven
to preserve wealth. "The yellow metal could extend above $1,800 in the
coming sessions."
The European Central Bank also bought 9.5 billion euros worth of
government bonds last week and still Italy's cost of borrowing soared to
more than 6.6%. "This gives reason to fear that the ECB will have to
expand its bond buying considerably in the coming months," says
Commerzbank especially as disagreements remain about how to boost the
firepower of the European Financial Stability Fund.
Although inflation in the Eurozone is at 3% and ECB President
Mario Draghi says prices should fall below the 2% mandated level during
2012, more money in the system leaves investors skeptical of paper
money, which leaves gold as a popular hedge.
Anthony Neglia, president of Tower Trading, is convinced that
"the only way to resolve this [EU crisis] is to print our way out."
Neglia had been looking for gold to break $2,000 an ounce this year but
has pushed out his timeline to the first quarter of 2012. "First time up
[to a resistance level], even if we have been there before there, is
always going to be a stop ... but when we get through $1,923 an ounce
it's a bullet train to $2,000."
Gold mining stocks were taking a breather after soaring higher Monday. Barrick Gold(ABX_) was down 0.36% to $52.62 while Newmont Mining(NEM_) was backing off from 52-week highs at $71.70. Other gold stocks, Goldcorp(GG_) and Randgold Resources(GOLD_) were trading slightly lower at $53.27 and $119.26 respectively.
--Written by Alix Steel in New York.
>To contact the writer of this article, click here: Alix Steel.
