Gold Prices Pop

NEW YORK (TheStreet) -- Gold prices were soaring as the U.S. dollar weakened.

Gold for April delivery was adding $28 to $1,118 an ounce at the Comex division of the New York Mercantile Exchange. Prices have traded as high as $1,121.90 and as low as $1,092. The U.S. dollar index was slipping 0.86% to $79.68.

The End of Gold's Correction

Risk appetite pushed gold prices higher as U.S. investors returned after a long holiday weekend. Investors typically buy gold contracts on the first trading day of the week after closing out some of their positions before the weekend. Also supporting gold's rally are continued talks over a European Union bailout for Greece. Reportedly the eurozone countries are giving the country a month to improve its high debt levels before forcing Greece to impose tax increases and spending cuts. Details on what kind of financial support the EU could eventually provide the debt-laden country are still uncertain and any failure to resolve the crisis will lead to a decline in the euro and weigh on gold prices.

For now market sentiment remains positive and trading conditions stay thin. Barclays reported a 2009 profit that more than doubled which fueled risk appetite and Chinese markets are closed for New Year celebrations. Thinner markets can lead to higher and more volatile price swings.

But some analysts are optimistic. "[This is] the end of the correction," Peter Grandich, chief commentator on Agoracom.com. "We need to get above $1,125 to officially, technically put it behind us ... we need two trading days above [this level] ... today I think we should hold most of these gains. The rest of the week I think we're going to see the shorts give one last chance to stop the rally, but the surprises in gold ... will be mostly to the upside."