Gold Prices Rally on Investor Panic
Source: TheStreet, Alix Steel (8/25/10)
"Gold rallied 0.5% Tuesday as spooked investors sold stocks for gold."
Gold for December delivery was adding $5.60 to $1,239/oz. at the Comex. The gold price Wednesday has traded as high as $1,243 and as low as $1,230.90 on low volume. The U.S. Dollar Index was rising 0.05% to $83.20, while the euro was rising 0.26% to $1.26 vs. the dollar. Spot gold Wednesday was up $7, according to Kitco's gold index.
From Asia to Europe to the U.S., stocks were down, economic data was negative and growth worries persisted. In Asia, the yen hit a 15-year high vs. the dollar, which didn't bode well for the future of exports (now more expensive to buy in other currencies). In Europe, Standard & Poor downgraded Ireland's credit rating to AA- with a negative outlook. In the U.S., existing-home sales plummeted more than 27% to the lowest level in 10 years as the government's new homebuyer tax credit expired.
Gold rallied 0.5% Tuesday as spooked investors sold stocks for gold. The trend is set to continue Wednesday as new-home sales in July fell 12% furthering fears of a double dip in the housing sector. Volume is also thin, which will keep prices volatile and gold will look to the Fed's two-day meeting with world bankers on Friday for any signs of additional monetary easing.
"Every time the Fed has said something, it's had a negative effect on general markets," says George Gero, VP of global futures at RBC Capital Markets, which would spark a flight to safety into gold. For a short-term trade range, Gero is looking at "$1,175 as a bottom support, $1,250 for a real resistance level. . .but the inside markets look to me like its $1,200–$1,225."