NEW YORK (
treaded water Tuesday amid technical trading and light volume ahead of the Christmas holiday.
Gold for February delivery settled up $2.70 to $1,388.80 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,393 an as low as $1,381.40.
U.S. dollar index
was adding 0.19% to $80.76 while the euro was down 0.24% to $1.30 vs. the dollar. The spot gold price was rising $2, according to Kitco's gold index.
Gold prices might have started their long holiday weekend a little early this year as worries in the European Union, tension in the Koreas and end-of-year book- squaring did little to boost prices.
"Prices are probably going to remain flat," says Phil Streible, senior market strategist at Lind-Waldock. "[But] there's still a lot of investor buying, there's still a lot of questions around the eurozone ... so there is underlying support."
Moody's Investors Service has been active of late when it comes to the eurozone nations, threatening a downgrade of Spain's debt as well as some of its banks and issuing a downgrade of five Irish banks on Monday. The ratings agency was busy again on Tuesday, placing Portugal on review for a possible downgrade, citing "longer-term economic vitality." Moody's also placed Greece's already slaughtered credit rating on watch negative.
Although the credit markets have been worried about EU debt issues for a year, an official downgrade would make it even harder for the countries to raise capital through the debt markets. Portugal and Spain's long-term borrowing costs rose Monday to 6.6% and 5.55% respectively, as the countries had to pay up to entice investors to lend them money.
Despite the worries, the euro was trading only slightly lower on comments from China Vice Premier Wang Qishan's that China backed efforts to the European debt crisis.
Gold's modest rally on Monday
doesn't look set to extend as investors chose to lock in profits for the end of the year and opted for stocks instead. George Gero, senior vice president at RBC Capital Markets, credited the rally to short-covering, "buying previously sold positions as open interest is not growing." Gero still sees $1,370 as a support area and $1,425 as resistance.
"Typical year end evening out patterns," says Gero, "as short rally precedes short sell-off and recovery, keeping uptrend intact."