Gold Prices Up; Volatility Expected


"With uncertainty still infecting markets, gold's trading range will stay tight."

Gold prices were firmly above $1,100 Monday as the U.S. dollar weakened.

Gold for April delivery was up $7.70 to $1,112 an ounce on the Comex. Prices have traded as high as $1,114.10 and as low as $1,103.10. The U.S. dollar index was slipping 0.29% to $81.36. Gold's spot price was rising over $4, according to Kitco's gold index.

A resolution to the Greek debt crisis and an international conflict in South Korea boosted gold prices Friday. Future contracts on the Comex traded higher on improving risk appetite after a joint IMF/EU bailout was announced for the first euro-zone country in danger of default. The combined multibillion euro aid package provided support for the euro after the currency fell to 10-month lows, which buoyed gold prices.

Spot gold got an even bigger boost as a safe haven, after a South Korean ship sank off the coast of North Korea. The suicide bombing in Moscow, which killed 36 people so far, has also increased gold's appeal. Investors rotate into hard assets during times of financial or international uncertainty.

The week ahead is expected to see thin trading with volatile moves. Markets are closed on Friday and some analysts anticipate sparse volume as traders observe the Passover and Easter holiday. Thinner trading leads to more unpredictability. Another upcoming factor for gold is Friday's nonfarm payroll report. Many economists are looking for a positive number which, on the one hand, could increase investor risk appetite, but also might prompt the Federal Reserve to raise interest rates sooner than expected.

With uncertainty still infecting markets, gold's trading range will stay tight. "The EUR/USD cross does look likely to provide further direction to gold," says James Moore, analyst at The Bullion Desk. "We expect dips below $1,100 to be viewed favorably by both investors and physical players with chart support pegged at $1,088 and resistance above around the 100-day MA at $1,120."

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