Gold for February delivery surged $22.70 to $1,405.60 an ounce at the Comex division of the New York Mercantile Exchange. The gold price traded as high as $1,407.20 and as low as $1,383.10 during Tuesday's session.
The U.S. dollar index was adding 0.19% to $80.40 while the euro was down 0.51% at $1.30 vs. the dollar. The spot gold price was jumping $21, according to Kitco's gold index.
Despite light volume because of the blizzard in the Northeast U.S. and what is basically a holiday week, gold was finding some last-minute direction headed into the end of the year. A sizable portion of Tuesday's pop was attributable to short covering and physical buying.The fact that gold prices held up after China hiked interest rates over the weekend triggered a flurry of short covering. Markets had been dreading this move for a while, so not only was the news already baked in but those betting against the gold price were left having to buy back positions at higher prices in the absence of a massive sell-off. On a fundamental basis, China's increase of just 25 basis points was relatively meager, and gold's jump suggests that investors don't believe the latest move will be enough to tame inflation in the country. Also, just the fact that inflation needs to be tamed in China is a relatively bullish sign for gold, unless China decreases spending significantly or raises rates more consistently or aggressively.