Gold Prices Dip; Inflation Cools
NEW YORK (
) --
were losing steam Wednesday on the back of a stronger U.S. dollar.
Gold for April delivery was falling $2 to $1,120.50 an ounce at the Comex division of the New York Mercantile Exchange. Prices have traded as high as $1,133.90 and as low as $1,120. The
was higher by 0.04% to $79.70. Gold's spot price was falling $6.30 according to Kitco's gold index.
Gold Will Stop Consolidating
Gold was paring its monster gains from Tuesday, when prices added over $20, on cooling inflation fears. The
said it would leave interest rates unchanged at zero to 0.25%. The Fed gave no indication of when it would raise rates as previously anticipated, but instead reiterated its promise to keep rates low "for an extended period." This extended the flow of free money but also indicated that the Fed believes inflation is stable.
Also cooling gold's rally was the Labor Department's report that year-over-year, the core
was unchanged at 1%. Inflation did not pick up in February, which helped the U.S. dollar rally but weighed on gold prices.
Gold might see some short-term downside as it retains its inverse correlation to the U.S. dollar. According to
The Associated Press
, the European Union has warned that some of its member countries' growth targets are too optimistic. Actual budget deficits could be worse than expected if economic recovery disappoints. The news could pressure the euro, boost the dollar and hurt gold prices.
"I think there has been a slight change in sentiment," says Nicholas Brooks, head of research and investment strategy for ETF Securities. "Investors who have been buying gold with an idea that inflation might become an issue are stepping back, or at least traders are moving in anticipation of that. I think on a medium-term basis the upward trend is likely to continue. It's pretty clear that the sovereign risk issue is not going to go away anytime soon. ... I think these kind of issues are going to increase demand for gold."
were holding onto gains adding 10 cents to $17.46 while copper was up 5 cents to $3.41.
Mining stocks, a more leveraged way to
, were mixed.
Barrick Gold
(ABX)
was rising slightly to $40.17, while
Newmont Mining
(NEM) - Get Report
was lower by 0.49% to $51.09. Other large-cap miners
Kinross Gold
(KGC) - Get Report
and
Goldcorp
(GG)
were trading at $18.08 and $39.72, respectively.
Shares of
Freeport McMoRan Copper & Gold
(FCX) - Get Report
were falling 1.34% to $81.07 while
Yamana Gold
(AUY) - Get Report
was trading at $10.18.
Shares of the popular physically backed ETF
SPDR Gold Shares
(GLD) - Get Report
were slightly lower at $109.71.
>>Slideshow: How to Invest in Gold
>>More stories on gold investing
--
Written by Alix Steel in New York
.
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.
