Gold Prices Volatile as $1,400 Still Eyed

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"Prices should head higher in the short term on QE."

Gold prices were volatile Friday as investors vacillated between buying gold as protection and taking profits.

Gold for December delivery was losing $1.80 to $1,375.80 an ounce at the Comex division of the New York Mercantile Exchange. The gold price Friday has traded as high as $1,386.40 and as low as $1,373.50.

The U.S. dollar index was slipping 0.25% to $76.35 while the euro was rising slightly to $1.41 vs. the dollar. The spot gold price Friday was falling $6.60, according to Kitco's gold index.

Gold prices got an initial pop after a speech Friday morning from Federal Reserve Chairman Ben Bernanke who, while not putting a dollar amount on more monetary easing, said inflation "can be too low" and that "overall economic growth is less vigorous than we would like," which most analysts took as a green light for more accommodative measures from the central bank.

Adding fuel to Bernanke's argument was the fact that the core Consumer Price Index for September was unchanged. Bernanke said that the Fed's next steps will be dictated by economic data and that a lack of inflation in September will certainly support the thesis that more money printing is needed.

Gold's rally was crimped somewhat Friday as profit-takers emerged and investors opted for stocks over gold on rising retail sales and the New York State Manufacturing Index. Traders might also be looking to book gains after gold's monster rally this week and on the heels of options expiration.

However, most analysts predict that gold prices should head higher in the short term amid the backdrop of monetary easing. George Gero, senior vice president and financial consultant RBC Capital Markets Global Futures, said that "buyers appear from everywhere at the first sign of profit-taking as currency weaknesses are hedged to maintain purchasing power."

With gold prices eyeing $1,400 an ounce, the question remains just how high can the metal go?

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