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 End Higher, After-Hours Action Brings More Volatility

NEW YORK ( TheStreet ) -- Gold prices were volatile again Thursday as investors battled with an on-again, off-again risk trade.

Gold for February delivery ended up $1.20 to $1,387 an ounce at the Comex division of the New York Mercantile Exchange. The gold price traded as high as $1,392.90 and as low a $1,377.20 during Thursday's session.

The U.S. dollar index was down 1.11% to $79.15 as the euro pushed higher, rising 1.85% to $1.33 vs. the dollar. The spot gold price Thursday was down $7.30, according to Kitco's gold index.

Trading opened with the now typical no-love-for-gold theme but then rebounded as weak jobless claims led investors into the precious metal. The spike brought in profit takers but gold managed to end the day slightly higher. Despite their volatility, prices can't seem to break out of a tight range of late.

Gold fell sharply in after-hours trading, however, losing more than $13, after Federal Reserve Chairman Ben Bernanke offered an upbeat assessment of the U.S. economy. Bernanke said the economy could grow 3%-4% in 2011 despite low unemployment.

Gold reacted badly because a better economy would take QE3 -- yet another round of fiscal stimulus -- off the table and raises the possibility that the Fed could hike key interest rates sooner than expected and crush any bubbling inflation.

The risk trade takes its cue from economic data and bounces from on-again to off-again and is taking gold prices with it. Investor risk appetite improved earlier after Spain raised money with little drama. Spain sold €3 billion in five-year bonds. Although interest rates rose to 4.54%, the market's optimism signals that this rate is manageable.

South Korea also raised key interest rates by 25 basis points to fight rising costs, which helped optimism. The move comes after President Lee Myung-bak reportedly announced a "war on inflation." The Bank of England left rates steady at 0.5% despite the fact that its November consumer price inflation reading popped to 3.3% and is expected to keep rising. The central bank said it expects inflation to fall to 2% in 2012.

The European Central Bank left rates unchanged at 1% although President Jean-Claude Trichet did say that there could be short term pressure on inflation, which could move higher maybe even over 2% before reverting lower.

The rate divergence is confusing for gold prices. Low rates are good for gold as the local currency is worth less and gold holds more appeal as a form of money that retains value. On the flip side, aggressive moves to raise rates will hurt this thesis and lead the inflation bugs out of the gold market.

Emerging-market economies like China, South Korea, Brazil and India are having to contend with rising inflation which has yet to really infect developed markets economies.

Gold will get more direction Friday when the U.S. releases its core consumer price index for December. Currently inflation is just 0.6% higher from a year earlier. The core producer price index rose just 0.2%.
1 of 3

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 $17.46 -5.01%
AU $14.89 -3.75%
GFI $4.21 -3.88%
KGC $5.07 -6.28%
NGD $4.22 -6.01%


Chart of I:DJI
DOW 17,651.26 -99.65 -0.56%
S&P 500 2,051.12 -12.25 -0.59%
NASDAQ 4,725.6390 -37.5850 -0.79%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs