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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Faltering Europe Fuels Gold Price Fires

Stocks in this article: ABX NEM GG AU GLD GOLD SLV IAU

NEW YORK ( TheStreet ) -- Gold prices skyrocketed Tuesday to a record close as weak second quarter growth numbers out of Germany and indecisive action from EU leaders spooked investors into the safe haven.

Gold for December delivery soared $27 to close at $1,785 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,789.80 and as low as $1,763.60 while the spot gold price was adding a more modest $14.20, according to Kitco's gold index.

Silver prices settled up 51 cents at $39.81 an ounce while the U.S. dollar index was adding 0.05% at $73.91.

Gold prices were popping on a slew of disappointing growth numbers out of the Eurozone. The highlight came from the revelation that Germany's economy grew only 0.1% in the second quarter, 2.8% year-over-year. The first quarter number was also revised down. Germany is the strongest Eurozone economy and its near contraction reading weighed on its neighbors -- Eurozone growth slowed to 1.7% from 2.5% in the first quarter.

Gold extended its gains after German Chancellor Merkel and French President Sarkozy failed to deliver the goods at a joint press conference this afternoon. They both rejected a common eurobond and offered limp suggestions for helping the eurozone's almost two-year old debt crisis.

Both leaders offered up a balanced budget rule that each member's parliament would have to pass and a financial transaction tax. Neither did anything to help stocks. "They keep going into a room and coming out with another plan to save the euro," says Chuck Butler, president of EverBank World Markets. This "weighs heavily on the euro and gives people the need to buy gold as a protection."

A flurry of inflation points also boosted gold Tuesday. India's inflation reading for July came in hot at 9.22%, import prices in the U.S. rose more than expected by 0.3%, the World Bank said food prices soared 33% year over year, and prices in the U.K. rose to 4.4% in July.

Expectations are now that inflation in the U.K. could top 5% this year and with interest rates at 0.5%, real rates are a negative 4.5%. The longer real rates stay in the red, the better return investors get on gold as the currency loses value.

Fears over debt, inflation and currencies are pushing gold up towards the $1,800 mark, which was surpassed briefly last week, but some experts think these high levels aren't sustainable. "Gold is overvalued in trading terms in the short term, as it has risen well above its moving averages," argues Mark O'Byrne, executive director at Goldcore, a bullion dealer. "There is the risk of a correction from these levels."

O'Byrne says, however, that gold could see a parabolic move in the near future as stagflation might rear its ugly head -- double dip recession fears mixed with high inflation. "Increasingly, the question is not if we go parabolic rather it is when do we go parabolic?" O'Byrne points out that in the final phase of the bull market it 1979, gold popped 140% in a year. In 2011, gold prices have risen 26%.

Whether or not today's rally is sustainable or just technical trading still remains to be seen. Jennifer Ropiak, vice president for NYSE Liffe US, says that "sometimes we get harsh moves because of short covering ahead of an event ... but other times that harsh moves are because people don't know what is going to happen."

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
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!


DOW 18,063.99 +10.28 0.06%
S&P 500 2,092.56 +3.79 0.18%
NASDAQ 4,808.4770 +1.6180 0.03%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

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