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
TheStreet Open House

Gold Prices Surge on Huge Short-Cover Rally (Update 1)

Stocks in this article: GLD ABX IAU

Updated from 10:30 a.m. ET with latest information on the spike in gold prices

NEW YORK (TheStreet) -- Gold prices surged in afternoon trading Wednesday as a so-called short-covering rally erased losses suffered earlier this week.

Gold for February delivery at the COMEX division of the New York Mercantile Exchange was gaining $26.20 to $1,247 an ounce. The gold price traded as high as $1,251.50 and as low as $1,210.80 an ounce, while the spot price was jumping $24.49.

A raft of positive economic data, following the worst November since 1978, failed to push the yellow metal below key technical support at around $1,210 an ounce. With better-than-expected November manufacturing activity and a positive pop in private payrolls, traders decided to vacate their short positions, Graham Leighton, a trader at Marex Spectron said in a phone interview from New York.

"These [traders] have been short gold for the last month or so," said Leighton, who added that one person "took their chips off the table," which triggered other traders to do the same. "The result of that is just a short-covering rally."

Prices dipped slightly on Tuesday and nearly $30 on Monday as the manufacturing data suggested that the economy is improving at a fast enough pace to force the Federal Reserve to scale back its economic stimulus program sooner rather than later.

"I think people are looking at the Fed potentially tapering next week, and I just do not believe that is on the table," Peter Hug, global trading director at Kitco Metals, said in a phone interview.

Many economists and market analysts are forecasting a so-called taper closer to March, and not for the Fed's next policy-making meeting scheduled in two weeks.

"[The gold market is] a little oversold and a little ahead of itself. And it's aggressively positioned to be short here," Hug said.

The gold market last month booked its worst November performance since 1978 as the yellow metal continued to lose favor during 2013 to stocks; the S&P 500 is up more than 25% year-to-date.

As for the Wednesday afternoon surge, Marex Spectron's Leighton said the rally won't likely continue.

"Now that these shorts are out of the market, our view is you have to look for a place to get short again," said Leighton.

Silver prices for March delivery were climbing 78 cents to $19.85 an ounce, while the U.S. dollar index was slipping 0.06% to $80.56.

Gold mining stocks were moving higher Wednesday in step with the gain in gold futures. Shares of Yamana Gold  (AEM) were up 4.1% to $8.76.

Among volume leaders, Barrick Gold (ABX - Get Report) was adding 1.3% to $15.71 a share. Reports emerged Wednesday that John Thornton would be rising to head the world's largest gold mining company, replacing its founder, Peter Munk.

Gold ETF SPDR Gold Trust (GLD) was tacking on 2% to $120.37, while iShares Gold Trust (IAU) was up 2% to $12.11.

-- Written by Joe Deaux in New York.

>Contact by Email.

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link 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

Jim Cramer's protégé, 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
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, 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!


DOW 17,437.69 +50.48 0.29%
S&P 500 2,033.88 +4.33 0.21%
NASDAQ 4,709.9130 +28.4160 0.61%

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