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Gold Prices Ditch Dollar/Euro Trend

The gold price Wednesday has traded as high as $1,151.20 and as low as $1,138.10 on strong volume.
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Gold prices

Wednesday were rising and bucking a stronger U.S. dollar and weaker euro, which typically drag on the gold price.

Gold for June delivery was adding $9.50 to $1,148.70 an ounce at the Comex division of the New York Mercantile Exchange. The gold price Wednesday has traded as high as $1,151.20 and as low as $1,138.10 on strong volume. The U.S. dollar index was rallying 0.18% to $81.20 while the


fell 0.21% against the dollar. The spot gold price Wednesday was rising over $7, according to Kitco's gold index.

Inflation Supports Gold Prices

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The euro was struggling Wednesday as Greek 10-year bonds jumped to an 8.24% yield which means Greece is having trouble finding buyers for its debt. In order to convince investors to loan it money, Greece must offer a higher yield to sweeten the pot. The lack of confidence in Greece means the country has to rely more heavily on the European Union and International Monetary Fund to provide bailout money so Greece can meet its May debt obligations. The EU and IMF are meeting to discuss the details of its pledged 45 billion euro bailout package, but the lack of any firm plan is undermining the euro and supporting the


. A stronger U.S. currency is tempering gold's upside as it tries to regain its momentum and push to $1,150 an ounce.

Many analysts expect gold prices to trade in a tight range as investors keep some money on the sidelines after Friday's selloff. "We're seeing some range trading now but I think because there are so many factors moving pieces at the moment that we could actually see a breakout one way or the other," argues Nicholas Brooks, head of research and investment strategy for ETF Securities. "You've got a lot of cash on the sidelines. There's still a lot of concern on what is going on in the markets. Now you're throwing inflation into the picture. I actually think that we could see some interesting movements over the next month or so."

The expectation of


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is always a big factor in moving the gold price. The more governments print money to cover their spending and debt, the higher the risk of inflation. Historically during times of a weak dollar, gold prices rise as investors buy the hard asset as a safety net. Inflation for the short term in the U.S. remains in check after the Labor Department said that the consumer price index rose only 0.1% in March, which was in line with expectations.

Federal Reserve


Ben Bernanke

has reiterated his commitment to keeping key interest rates at zero to 0.25% for an extended period of time which puts inflation on the back burner.

Other countries are a little more cautious. China is taking steps to curb its economic growth by making it harder to lend money and the Indian central bank raised its key interest rates again Tuesday by 25 basis points to combat the flow of cheap money. England also reported that inflation rose to 3.4% in March from 3% in February. Although most analysts do not expect the Bank of England to raise interest rates, the inflation fear is reverberating through markets.


price of silver

was up 23 cents to $18.06 while copper prices were flat at $3.52.

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Mining stocks, a more leveraged way to

invest in gold

, were mixed.

Barrick Gold


was rising 1.56% to $39.74 while

Newmont Mining

(NEM) - Get Newmont Corporation Report

was up 1.32% to $52.17. Other large-cap miners

Kinross Gold

(KGC) - Get Kinross Gold Corporation Report




were up over 1% to $18.07 and $39.62, respectively. Goldcorp recently received an upgrade from

TD Newcrest

to action list buy from buy.

Shares of

Gold Fields

(GFI) - Get Gold Fields Ltd. Report

were rising 1.99% to $12.78 after the company said it was on target to ramp up production at its South Deep Mine. Gold Fields estimates the mine will turn out between 750,000 and 800,000 ounces by 2014.

Freeport McMoRan Copper & Gold

(FCX) - Get Freeport-McMoRan, Inc. Report

was falling 3.37% to $78.08 despite reporting first-quarter earnings of $2 a share and a dividend increase. The company is very levered to copper demand from China and any slow down in construction and flow of cheap money will undercut Freeport's profit potential.

The popular physically backed ETF,

SPDR Gold Shares

(GLD) - Get SPDR Gold Shares Report

was adding 0.88% to $112.44.

>>How to Invest in Gold

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Written by Alix Steel in New York


Alix joined 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.