Gold Bugs Reach for Sky as Stocks Struggle

Updated from 1:20 p.m. EST

As the stock and Treasury markets struggled Wednesday, gold was hitting new highs again. Gold for February delivery traded at $518.20 an ounce intraday, its highest level since February 1983, before closing up $3.70 at $517.50.

Once again, the yellow metal's advance is happening as the dollar is gaining. A stronger greenback normally weakens the price of gold, which is priced in dollars, as it takes less money to buy the same amount of gold.

The dollar was rising amid expectations that the Federal Reserve will hike rates again next week. Meanwhile, the European Central Bank has dampened expectations of a follow-up to its Dec.1 rate hike. Japanese Prime Minister Junichiro Koizumi said overnight that it is too early for the Bank of Japan to abandon its zero-rate policy.

The euro was recently trading at $1.1720 compared with $1.1779 late Tuesday. The dollar was rising slightly against the Japanese currency, recently trading at 120.96 yen from 120.85 Tuesday.

Stocks, meanwhile, remained mired in the red in midday trading and ahead of midquarter updates from Texas Instruments (TXN Quote) and Intel (INTC Quote) on Thursday and Friday, respectively.

Lower oil prices and an upgrade of Cisco (CSCO Quote) weren't enough to offset concerns about the Fed's intentions. The Dow Jones Industrial Average was recently down 0.7% at 10,785.06. General Motors (GM Quote) was the biggest loser on the Dow, recently falling 2.4% after news of CFO John Devine's departure. Competitor Ford (F Quote) was gaining 2.1% after a report the automaker plans to cut up to 30,000 jobs within five years.

The S&P 500 was off 0.7% to 1255.43, and the Nasdaq Composite was down 0.6% at 2248.39. The price of the benchmark 10-year Treasury was recently down 7/32 in price to yield 4.51%.