This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Gold Prices Surge to Record Highs

NEW YORK ( TheStreet ) -- Gold prices popped Tuesday as investors turned to the metal as a safe-haven asset and momentum buying pushed prices to new all-time peaks.

Gold for December delivery settled $24.60 higher at $1,271.70 an ounce -- a record closing high -- at the Comex division of the New York Mercantile Exchange. The gold price hit a record intra-day high of $1,276.50 an ounce, $10 higher than its previous high set in June.

The U.S. dollar index was losing 0.91% to $81.11 while the euro was gaining 1.01% to $1.30 vs. the dollar. The spot gold price was rising more than $26, according to Kitco's gold index.

>>Preventing Your Government From Stealing Your Gold

Gold prices soared Tuesday on inflation worries out of the U.K. and a weaker-than-expected eurozone industrial production report.

Inflation fears jump-started the gold market in early trading after the U.K. consumer price index rose 3.1% in August from a year earlier. Economists were expecting a rise of 2.9%, but higher food, clothing and air travel moved the index higher. Gold is the go-to commodity when investors panic over inflation as gold is a form of money that retains some value. Unlike paper currencies, gold's value can never go to zero.

Gold prices were also being helped by a weaker industrial production reading out of the European Union. Activity for July rose 7.1% year over year vs. the 8% expected. Despite sovereign debt fears, the EU, led by the stronger nations like Germany and France, has been able to keep growing but today's data signaled a possible reversal or a slowdown.

U.S. retail sales for August rose 0.4% vs. the 0.3% expected but didn't seem to dampen gold's rally. Investors, trying to protect themselves against more negative news, were buying gold as a safe-haven asset.

The gold market is also subject to peer pressure buying. When the gold price moves double-digits, retail investors can jump into the market for fear of missing the boat. Technically, gold might also be reacting to buy stops in the market. If the price hits a certain level, a trader pulls the trigger and buys.

"Momentum buyers are in here as higher volume, higher close and higher open interest inspired traders," said George Gero, vice president of global futures at RBC Capital Markets.

The question is -- is this rally sustainable? Many analysts look for a close above a certain level for three consecutive trading sessions before believing a price move. Also today's massive double-digit surge could also result in profit-taking, leaving some analysts wary.

"I'm thinking maybe we back off to the $1,230s," says Phil Streible, senior market strategist at Lind-Waldock. "But historically, September is a great month for the gold market so that weakness I would definitely look at as an opportunity to the upside."

The long-term outlook for gold prices among some experts is still positive. The GFMS Research Group released its Gold Survey 2010 Tuesday; Philip Klapwijk, executive chairman, said gold could "spike comfortably above $1,300 before the year's out." Klapwijk anticipates several bouts of profit-taking but that it doesn't mean gold's bull run is over. Strong safe-haven demand will continue to support prices.

The report also noted that gold and the U.S. dollar have bucked their inverse correlation. Typically, the two assets move in opposition as a stronger dollar makes the dollar-backed commodity more expensive to buy in other currencies and vice versa. Times of real market panic have altered the dollar/gold inverse relationship as both are bought as safe havens, an alternative to stocks and "riskier" currencies like the euro.

Silver prices settled up 28 cents to $20.43 while copper closed down 1 cent at $3.46 on the weak industrial production data.

Most Recent Quotes from

Gold mining stocks, a risky but potentially profitable way to buy gold, were rising Tuesday. AngloGold Ashanti (AU - Get Report) was rising 6.21% to $47.36 while Eldorado Gold (EGO - Get Report) was adding 5% to $19.96. Barrick Gold (ABX - Get Report) was advancing to $45.59 and Freeport McMoRan Copper & Gold (FCX - Get Report) was flat at $81.81.

-- Written by Alix Steel in New York.

>To follow the writer on Twitter, go to

Readers Also Like:

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
ABX $18.38 0.00%
AU $15.47 0.00%
EGO $3.95 0.00%
FCX $12.01 0.00%
AAPL $95.18 0.00%


Chart of I:DJI
DOW 17,750.91 -140.25 -0.78%
S&P 500 2,063.37 -18.06 -0.87%
NASDAQ 4,763.2240 -54.37 -1.13%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs