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Gold Prices Close Quarter on Up Note

Gold prices managed to settle higher as traders adjust their gold holdings at the end of the second quarter.
Author:

NEW YORK (

TheStreet

) --

Gold prices

settled slightly higher Wednesday as investors rebalanced their gold positions on the last day of the second quarter.

Gold for August delivery closed up $3.50 to $1,245.90 an ounce at the Comex division of the New York Mercantile Exchange. The gold price today has traded as high as $1,248.80 and as low as $1,235.10. The

U.S. dollar index

was slipping 0.16% to $85.99 while the euro was rallying 0.55% to $1.22 vs. the dollar. The spot gold price Wednesday was adding more than $1, according to Kitco's gold index.

Gold prices ended the second-quarter 10% higher as gold retained its appeal as a safe haven asset. But technical trading will keep gold volatile in the short term. Many traders wrapping up the first half of 2010 and preparing for the long U.S. holiday weekend are adjusting gold positions in their portfolio. Some will buy gold to show they have exposure while others will sell gold to show they made a profit or to cover losses in stocks.

Beware Fickle Gold Prices

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"Technically, buyers are recently re-entering with buy stops to regain previously sold positions," says George Gero, vice president of global futures at RBC Capital Markets. "Volume is not heavy as ... vacation this week has thinned the ranks of the trading desks."

The popular gold ETF

SPDR Gold Shares

(GLD) - Get Report

did manage to add more than 4 tons on Tuesday as investors bought the precious metal last minute. The State Street Global Advisors said that the GLD's assets increased 32% year to date and has broken the $50 billion mark.

"GLD is increasingly being used as part of a long-term diversification investment strategy within investors' portfolios in a variety of market cycles currently playing out worldwide," said James Ross, senior managing director at State Street Global Advisors. Shares were rising slightly to $121.53.

The worry, however, is that this type of trading will decrease once the third quarter starts, and traders might be more apt to sell their gold positions for cash or stocks if risk appetite improves. Summer is typically a slow buying season for physical gold as a lack of festivals in India and China leave consumers devoid of a big reason to buy gold. On the investment side, volume is fickle during holiday weeks and summer months as many traders put sell and buy stops on gold making the metal more of a trading vehicle rather than an investment.

Euro strength today

could be tempering gold's upside and distracting buyers as the

European Central Bank said it would lend

$161 billion to 171 banks for a three-month loan. Experts were expecting the ECB to have to provide liquidity to more banks, which indicates that perhaps the EU is getting its financial house in order.

In the U.S., Automatic Data Processing said the private sector added just 13,000 jobs in June as compared to 57,000 in May. Economists were looking for growth of 60,000. The disappointing number is a leading indicator of the Labor Department's unemployment number on Friday. A negative reading could help gold's safe haven bid, but also increase investors' need for cash. If the number surprises and is better than expected, experts are anticipating an addition of 100,000 private sector jobs, traders could sell gold to buy riskier stocks.

Gold prices have fallen almost 1% this week

and many analysts expect gold to stay in neutral until volume improves. Gold still has yet to conquer its previous intraday high of $1,264 an ounce, and experts are looking for consecutive closes above $1,250 to feel confident in another leg higher for prices.

Silver prices

settled up 7 cents to $18.70 while copper closed higher by 2 cents at $2.95. Both metals, which are tied to industrial use, rallied after Tuesday's selloff when prices fell 0.76% and 5.1% respectively, due to concerns about a sustainable global economic recovery.

TheStreet Recommends

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Gold mining stocks, a more profitable but more risky way to

invest in gold

, were mixed.

Yamana Gold

(AUY) - Get Report

was adding 0.18% to $10.34 while

Kinross Gold

(KGC) - Get Report

was sinking slightly to $17.15. Other large gold stocks

Agnico-Eagle

(AEM) - Get Report

and

Eldorado Gold

(EGO) - Get Report

were trading at $61.23 and $18.04, respectively.

--

(SYMBOL) by Alix Steel in

.

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Alix joined TheStreet.com TV in February 2007. Previously, she held positions in film and theater production, management, and legal administration. Alix has a degree in communications and theater from Northwestern University.