NEW YORK ( TheStreet) -- Gold prices were rising Friday as traders covered their short positions in a dramatic reversal from earlier in the morning, which had witnessed the yellow metal dip below $1,200 an ounce for the first time since August 2010.
Gold for August delivery at the COMEX division of the CME was climbing $3.70 to $1,215.30 an ounce. The gold price traded as high as $1,220.80 and as low as $1,179.40 an ounce, while the spot price was adding 42 cents.
COMEX gold has dropped more than $400, or 25%, in the second quarter of 2013, a period that witnessed the precious metal's largest two-day selloff in some 30 years.
Gold held below $1,200 an ounce for a period Friday morning, but shot above the flatline as heavy short covering entered the market on the backs of bargain hunters who found few sellers following a favorable consumer sentiment report, according to a note from George Gero, precious metals strategist at RBC Capital Markets.The Reuters/University of Michigan consumer sentiment index in June rose to 84.1, a slight increase from 82.7 in the middle of the month. Fact and Opinion Chief Economist Robert Brusca called the reading mixed, because the reading is stronger than the preliminary estimate but lower month over month. Gold has failed to post a single positive trading session this week, with prices dropping nearly $15 on Monday, about $45 on Wednesday and more than $18 on Thursday. The space in the immediate term has been difficult since the Federal Reserve on June 19 issued its latest policy-making statement. Fed Chairman Ben Bernanke followed the statement with his own comments, which traders interpreted as a signal that speculation had shifted to when the central bank may start to taper its monetary stimulus program, instead of whether it would taper. "Nobody wants to catch the falling knife," said James Moore, an analyst at FastMarkets.com. "I think for now maybe the short-term risk to the downside are easing, but it's going to be a brave person that stands up to the momentum." Silver prices for September delivery were moving up 69 cents to $19.25 an ounce, while the U.S. dollar index was rising 0.35% to $83.24. Physical demand, which propped up unstable prices in April, remains weak in June as demand falls further in India -- the world's largest consumer of gold. The government there imposed duties on gold and other imports in an attempt to reduce a trading deficit. Demand from China also has waned on concerns that the economy is slowing. FastMarket.com's Moore said he anticipated relief on Friday because he had expected dips on book-squaring to occur earlier in the week.