NEW YORK (
spent much of Wednesday flat after shedding 1.5% of their value on a broad market selloff in the previous session.
Gold for December delivery settled $1.50 lower at $1,336.90 an ounce at the Comex division of the New York Mercantile Exchange. The gold price traded as high as $1,344.60 and as low as $1,330.10 during Wednesday's session.
was losing 0.18% to $79.07 while the euro was rising slightly to $1.35 vs. the dollar. The spot gold price was down $1.70, according to Kitco's gold index.
Gold, for now, seems to have stemmed its furious selloff from Tuesday as investors stepped in to buy gold at lower prices. But gold prices will probably stay in no-man's land as uncertainty in Ireland weighs on the euro, helps the dollar and caps any gains in gold.
Prices plummeted through the key $1,350 an ounce support level Tuesday
and were close to breaking down even further to $1,315, but investors jumped in and tentatively bought the dip. Jed Handwerger, editor of
, is looking for a correction to $1,250 before he re-enters the market.
"I would be looking for specific patterns ... this recent breakout ... was not really a strong breakout," says Handwerger who is still expecting a dollar bounce and is urging investors to be cautious. "I've told my readers to be 100% defensive we have a lot of different issues in the markets right now ... we have to be careful of a significant correction."
Promising to weigh on gold prices is the threat of China raising interest rates to fight inflation. Some experts speculate it could be as early as this Friday as the country has a history of raising interest rates on the 20th of any given month.
The U.S. Department of Labor also said Wednesday that the core consumer price index, an inflation indicator, was unchanged in October. Possible decreasing inflation in China and no inflation in the U.S. are hurting investors who bought gold as an inflation hedge.
Meantime, the International Monetary Fund, eurozone and European Union are pressuring Ireland to take a bailout. Reportedly, Ireland's finance minister will meet with officials from the European Central Bank, EU and IMF on Thursday to broach the topic of aid and examine the health of Irish banks.
Until investors get some clarity on the Ireland debt situation and what it means for other EU nations like Spain and Portugal, which are also struggling, the euro is expected to stay under pressure which will support a higher dollar and temper gold prices.
Technical trading is also contributing to gold's volatility right now as options expiration comes at the end of the month and recent sell-offs have triggered sell-stops, where traders, trying to preserve profits, are forced to sell.
Kevin Cook, analyst for Options Profits, says gold has probably touched its highs for the year but that the bull trend could resume in January. "I will be looking for a timing opportunity to establish new long positions in gold, via
SPDR Gold Shares
Market Vector Gold Miners
Tonnage, however, in the GLD, the most popular gold exchange-traded fund, remains unchanged from last Thursday. The ETF has survived Friday's and Tuesday's double-digit selloff as investors held onto shares of the ETF. New money might not be flowing into the ETF, but investors appear to be holding on to their current positions despite volatility in gold prices.
World Gold Council
also released its gold demand trend report for the third quarter, which showed that total gold demand grew 12% from the same period a year earlier. Jewelry demand grew 8%, led by emerging market countries like China and Turkey; retail investment rose 25%; gold ETF demand slipped 7% as there was no imminent crisis in the third quarter; industrial demand grew 13% back to pre-crisis levels.
The World Gold Council, which is the sponsor of the GLD, believes that one of the main drivers for high gold prices in the fourth quarter will be recovering demand from emerging market countries like India and China. Typically these countries are very price sensitive but that "rising income levels, high savings rates and strong economic growth
will continue to push up consumption."
Adrian Ash, head of research for
, also credits China and India with leading gold prices higher. "If you look at the Indian market, a lot of the Indian gold buying is mandated by the religion ... often in India that buying is done by the housewife. What you are seeing now ... is the husband in the house is now starting to look at gold as a physical investment."
Ash says it's the volatility in gold prices that scares off buyers not the high prices and that once prices settle then gold buying should resume in full force. According to the WGC report, jewelry demand in India grew 36% in the third quarter as the rupee rose vs. the dollar which helped give consumers more purchasing power despite the fact that gold broke $1,300 an ounce.
were also recovering modestly on Wednesday and rose 27 cents to $25.51 while copper was flat at $3.72.
, a risky but potentially profitable way to
, were tentatively higher.
was adding 0.69% to $17.54 while
Freeport McMoRan Copper & Gold
was 0.29% higher at $97.89. Other gold stocks
were trading at $14.43 and $16.75, respectively.
Written by Alix Steel in
>To contact the writer of this article, click here:
>To follow the writer on Twitter, go to
>To submit a news tip, send an email to:
Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.