Gold Prices Volatile on Stronger Dollar
Source: The Street, Alix Steel (11/29/10)
"The euro has sunk 4.4% vs. the dollar in the past week."
Gold for December delivery was losing $1.50 to $1360.90 an ounce at the Comex division of the New York Mercantile Exchange. The gold price Monday has traded as high as $1,367.60 and as low as $1,352.60.
The U.S. dollar index was adding 0.82% to $81.05 while the euro fell 1.19% to $1.30 vs. the dollar. The spot gold price was down $1.80, according to Kitco's gold index.
Despite the European Union's attempts to curb the selloff in the euro, investors were still dumping the currency on worries that $113 billion aid package to Ireland might not be able to prevent contagion to Portugal, Spain and Italy. The EU announced new bailout conditions starting in 2013 with revised terms, which could leave bondholders on the hook if a country needs money, to pave the way for bigger financial aid needs.
The euro has sunk 4.4% vs. the dollar in the past week as investors rotated into the perceived safety of the U.S. dollar. A stronger dollar has put modest pressure on gold prices.
"We think there is the risk of further corrections over the next few weeks," says James Moore, analyst at The Bullion Desk. "Gold, while vulnerable, should remain cushioned by safe-haven."
In the short term, gold must contend with book-squaring and profit-taking headed into the end of the year.
The tug of war on gold will mostly likely lead to increased volatility especially as traders are forced to either roll over their gold contracts or let them expire before Dec. 1.
The gold exchange-traded fund, SPDR Gold Shares, currently has 1,285 tons, which has remained unchanged for the last week.