This Day On The Street
Continue to site
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

Gold Prices Settle Below $1,400 On the Comex

NEW YORK ( TheStreet) -- Gold prices sank Wednesday on a combination of profit-taking and technical trading.

Gold for December delivery settled $10.80 lower at $1,399.30 an ounce at the Comex division of the New York Mercantile Exchange. The gold price traded as high as $1,410 and as low as $1,383.40 on Wednesday.

The U.S. dollar index was adding 0.38% to $77.74 while the euro was losing 0.08% to $1.37 vs. the dollar. The spot gold price was adding more than $4, according to Kitco's gold index.

Gold prices struggled across the board on Wednesday. Tentative bargain hunting for the physical metal held up the spot price, while the futures market endured a deeper sell-off. Technical selling and a stronger U.S. dollar eventually won out to drag all metal contracts lower.

Silver prices lost $2.04 to $26.86 after the Chicago Mercantile Exchange raised the amount of money investors need as a deposit before they can buy silver contracts to $6,500 from $5,000. The increase spooked investors, which filtered into the gold market as well.

George Gero, vice president at RBC Capital Markets, said that "yesterday's volatility continues as the higher the price, the higher the volatility in futures." Technical selling combined with stop-loss orders, where traders are forced to sell after gold breaks through a certain level, are "finding few buyers for now."

Traders are in the process of deciding if they want to let their gold December option contracts expire on the first of the month or else put up new capital to roll them over to February 2011. Gero expects the massive selling to be done by tomorrow.

Most Recent Quotes from www.kitco.com

Gold prices were up roughly 27% for 2010 after hitting a record intraday high of $1,424 an ounce on Tuesday. Traders usually use that kind of surge as an opportunity to take profits.

"No market goes straight up or straight down" said Greg Marshall, CEO of Global Asset Management. " Gold will correct ... but the corrections we've seen of late always bring more buyers into the market."

Tuesday's correction was no exception for the spot market. Investors, those who might be buying gold for the long term, still bought the physical metal taking advantage of any price dips under $1,400.

"I don't believe there is such a thing as a gold bubble at least not yet," said Marshall, who sees $1,500 gold by the end of the year. "In order for there to be a gold bubble the general public would be buying it and that is still not the case ... gold will be two to three times higher in price when the general public is finally in this market."

Also in the background for gold was confirmation from China that the country raised the amount of money banks must hold in their reserves by 50 basis points.

The move, in essence, takes money out of circulation as China tries to stem inflation. The move also curbed risk appetite as markets worry that China will now spend less. China has been credited with jump-starting a global economic recovery; worries that the country will stop spending has been in the back of traders' minds only to be confirmed with higher reserve requirements.

The news made investors seek the safety of gold as a hard asset while jittery traders responded by selling some of their futures positions.

1 of 2

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
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!
SYM TRADE IT LAST %CHG
GFI $4.02 0.00%
FCX $20.67 0.00%
KGC $2.28 0.00%
NGD $3.54 0.00%
AAPL $124.75 0.00%

Markets

DOW 17,826.30 -279.47 -1.54%
S&P 500 2,081.18 -23.81 -1.13%
NASDAQ 4,931.8150 -75.9760 -1.52%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs