This Day On The Street
Continue to site right-arrow
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
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Gold Prices Pull Back as Investors Await Debt Deal

NEW YORK ( TheStreet ) -- Gold prices fell from record highs Thursday as investors took profits while awaiting a debt deal from Washington.

Gold for December delivery, the most actively traded contract today, closed down $1.10 to $1,616.20 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,622.80 and as low as $1,605 while the spot gold price was down $1.10, according to Kitco's gold index.

Silver prices lost 77 cents to $39.79 an ounce. Silver was trading more as an industrial metal, subject to slowing global growth, versus a safe haven asset. The U.S. dollar index was adding 0.14% at $74.20 while the euro was shedding 0.42% vs. the dollar.

EU debt fears were trumping U.S. debt fears for the moment, which was helping the dollar, after the S&P cut Greece's credit rating further into junk territory with a negative outlook signaling more downgrades were possible. A surprising decline in people filing for unemployment claims for the week ended July 21st was also boosting the dollar.

The relatively stronger dollar, along with bargain hunting in stocks, was crimping any safe haven rally in gold but prices were supported above the $1,600 level as a default come August 2nd seems possible. Investors were also opting for profits ahead of more debt ceiling debate. The House is set to vote on Speaker Boehner's revised debt plan Thursday, although Senate Democrats have already united to block it.

"There remains severe concerns current deficit reduction are not enough to avoid default," says James Moore, research analyst at FastMarkets, "with ratings agency Standard & Poor's requiring a $4 trillion reduction commitment over 10-years."

Moore thinks that big investors are sitting on the sidelines as a default would be unchartered territory for financial markets. There is the concern that in case of a default investors will dump and run from all assets including gold.

The collapse of Lehman Brothers in 2008 provides a good example. From the beginning of September 2008, when reports of Lehman bankruptcy circulated with force until the end of 2008, the S&P sold off 36.1%, whereas gold lost 1.65%. In the first quarter of 2009, gold rallied more than 6% while the S&P fell a further 12.96%.

A two percentage decline for gold from current levels would put prices somewhere within the $1,575-$1,580 an ounce range, still record territory.

Tim Harvey, senior vice president of ETF Securities, says gold will sell off a bit in case of a default "but how far it comes off is another matter." Harvey thinks it could be a case of gold retrenching and then going higher. "All we are trying to do now is fix how we are going to be able to spend a bit more cash not how we are going to fix paying this huge amount of debt we have."

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
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

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
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!
AEM $32.15 0.12%
ABX $13.02 2.04%
AU $11.27 0.99%
EGO $5.80 4.88%
GG $21.98 1.10%


DOW 18,132.70 -81.72 -0.45%
S&P 500 2,104.50 -6.24 -0.30%
NASDAQ 4,963.5270 -24.3630 -0.49%

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