Gold Prices Claw Their Way Higher

Source:

"Prices recovering after a 2.5% plummet following China's rate hikes."

Gold prices were gaining ground Wednesday on a weaker dollar and technical trading.

Gold for December delivery was adding $7 to $1,343 an ounce at the Comex division of the New York Mercantile Exchange. The gold price Wednesday has traded as high $1,345.90 and as low as $1,331.10.

The U.S. dollar index was slipping 1.34% to $77.16 while the euro was rallying 1.18% to $1.39 vs. the dollar. The spot gold price was up $9.10, according to Kitco's gold index

Gold prices were recovering after plummeting 2.5% Tuesday on fears that a surprise rate hike in China would crimp demand for the precious metal. The dollar popped more than 1% which also hurt gold, a dollar-backed commodity, and made the metal more expensive to buy in other currencies.

"[Gold is] vulnerable to a deeper correction should equities extend lower," says James Moore, analyst at The Bullion Desk in his daily metals report. "However, we expect gold, and to a less-extent silver, to remain underpinned by investment demand as players diversify from fiat currencies and longer-term inflation concerns."

Gold's violent correction Tuesday points to more speculative trading by hedge funds, says some experts, which can also explain the violent rallies in gold as well.

Gold will continue to look for direction from the Federal Reserve and the dollar. Numbers are starting to trickle in on the amount of quantitative easing. The previous Fed debt purchase program was $1.7 trillion, but current numbers are ranging anywhere from $1 trillion to $500 billion

In the meantime the dance between bargain hunters and profit-takers should continue as gold bulls take advantage of price dips and traders sell gold at tops to book gains.

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