Gold Prices Reverse, Settle Higher

Gold prices closed higher Friday as bargain-hunters beat out investors' need for cash.
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Gold prices

reversed Friday and settled higher as investors bought gold at a "discount" after a disappointing jobs number.

Gold for August delivery settled up $7.70 to $1,217.70 an ounce at the Comex division of the New York Mercantile Exchange. The gold price Friday has traded as high as $1,220.60 and as low as $1,198.10. The

U.S. dollar index

was adding 1.12% to $88.20 while

the euro was down

1.55% to $1.19, a 4-year low against the dollar and a lifetime low against the Swiss Franc. The spot gold price Friday was adding more than $6, according to Kitco's gold index.

Investors opted to buy gold and the U.S. dollar headed into the weekend. Gold prices had been down near the $1,200 level earlier in trading as investors sold out of stocks and gold in favor of cash. But as the

Dow Jones Industrial Average

plummeted through 10,000, investors sought gold as a safe place to put their money.

How to Trade Gold's Sell-Off

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The gold exchange-traded fund,

SPDR Gold Shares

(GLD) - Get Report

, added 21 tons on Thursday as investors hedged their stock bets with the GLD more than the gold futures market or physical gold. Gold ETFs that are physically backed offer investors a way of tracking the spot price of gold without the hassle. One share of the GLD roughly equals one-tenth an ounce of gold. If there is more demand and not enough shares in circulation, more gold tonnage must be bought to issue new stock. Shares were rising 0.70% to $118.78.

Gold prices briefly slipped below the $1,200 level which proved to be a strong support level for gold as the "discount" price brought out bargain-hunters. However, a stronger dollar and thinning volume resulted in volatility for prices and tempered gold's upside.

Gold prices were taking direction from the U.S. nonfarm payrolls report. The unemployment rate slipped the 9.7%; that's the good news. But only 431,000 jobs were added with 411,000 of them from short-term work due to census hiring. Only 41,000 private sector jobs were created worrying analysts that the economic recovery is fragile at best. Investors took the news and rushed out of stocks to flee to the safety of cash and gold.

"The fundamentals of gold are very strong, but if risk appetite picks up again ... and

investors begin to allocate more capital back into the stock market then that could be negative for gold in the short term," says Mark O'Byrne - executive director of Goldcore. "But medium to long term I think the fundamentals are really sound because people are very concerned about sovereign debt issues." O'Byrne stands by his prediction that gold prices could hit $1,400 by the end of the year.

For the long term, European sovereign debt fears will continue to dominate gold prices. Reports indicate that Hungary is now at risk of default.


reported that a spokesman from the prime minister's office said "default talk is not an exaggeration." HSBC also downgraded Europe, except for the U.K., from neutral to underweight.

Silver prices

were losing 63 cents to $17.29 while copper was slipping 12 cents to $2.81. Worries still persist that a weaker global economic recovery, led by Europe and China, will crimp demand for industrial metals and hurt prices over the long term.

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

invest in gold

, were struggling.

Barrick Gold


was down 2.32% to $41.32 while

Newmont Mining

(NEM) - Get Report

was sinking more than 1% at $53.68. Other large gold miners

AngloGold Ashanti

(AU) - Get Report




were down at $41.59 and $42.01, respectively.

Shares of

Freeport McMoran Copper & Gold

(FCX) - Get Report

continued sinking along with copper prices losing 5.24% to $62.70 while

Randgold Resources

(GOLD) - Get Report

were down slightly at $85.99.


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.