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.
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