This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Gold Prices Volatile, Eye $1,300

Stocks in this article: GLD UXG FCX EGO NGD GFI

NEW YORK ( TheStreet) -- Gold prices are moving to $1,300 an ounce on inflation worries, rumor of quantitative easing round II from the Federal Reserve and a lackluster global economy.

Gold for December delivery Friday settled $3.70 higher to $1,277.50 an ounce on the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,284.40, another record, and as low as $1,273. The U.S. dollar index was adding 0.13% to $81.36 while the euro was down 0.22% to $1.30 vs. the dollar. The spot gold price was adding 90 cents, according to Kitco's gold index.

Gold prices lost some steam Friday as the U.S's weak inflation reading tempered inflation fears that have been bubbling up around the globe. The U.S. consumer price index for August was unchanged from July but this was in opposition to a higher-than-expected producer price index reading on Thursday. The U.K. reported a higher inflation reading this week and India's central bank is taking steps to take money out of circulation to fight inflation.

Friday is also quadruple witching in which options on stock index futures, stock options, stock index options and stock futures all expire, leaving traders having to rebalance their portfolios. This leads to more volatility especially in the gold market.

But the real reasons gold is breaking to new highs right now are hedge funds and the Federal Reserve. The Fed will meet Tuesday to discuss interest rates, and although no changes are expected, the rumor is that the Fed will run its printing presses and issue another round of monetary easing. A low inflation reading in the U.S. might also give the Fed a green light to pump more money into the system.

Although there have been reports that the Fed will do no such thing because the governors can't come to a consensus, the conviction and gold's monster rally tell a different story.

The other factor moving gold prices is hedge fund buying. Strong double-digit gains like the market saw on Tuesday always point to big purchases. Many experts say that gold will inevitably hit $1,300 as "it seems very likely that the funds have decided that this is the next target," says Jon Nadler, senior analyst at Kitco.com.

Of course, fund buying leaves the room for fund selling. If funds are buying gold as protection against more quantitative easing then what happens if the printing presses never run and the crisis premium comes out of the market? A $30 move up could result in a $30 selling frenzy.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link 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

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, 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
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,672.60 -141.38 -0.79%
S&P 500 2,051.82 -11.33 -0.55%
NASDAQ 4,757.8790 +7.4820 0.16%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs