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Gold Prices Rise Ahead of Fed Meeting

Gold prices settle slightly higher Monday ahead of the Federal Reserve's policy-making meeting this week.
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) --

Gold prices

rose slightly Monday as investors bought the metal ahead of a meeting of the

Federal Reserve's

policy-making arm.

Gold for December delivery settled $3.30 higher at $1,280.80 an ounce at the Comex division of the New York Mercantile Exchange. The gold price traded as high as $1,285.20 and as low as $1,275.60 in Monday's session. The

U.S. dollar index

was slipping 0.13% to $81.29 while the euro was flat at $1.30 vs. the dollar. The spot gold price Monday was rising $4.80, according to Kitco's gold index.

Gold prices were continuing their climb to $1,300 an ounce

as investors bet on the Federal Reserve announcing another round of quantitative easing on Tuesday. If the Fed decides to buy more government bonds and expand the size of its balance sheet, it means the central bank will also need to run its printing presses.

More U.S. dollars in circulation would devalue the currency and make gold even more attractive as a form of money that retains some value. If the Fed doesn't announce more monetary easing, traders might rotate out of gold for riskier assets in the short term, but the expectation is that the Fed will commit to this course of action, if not Tuesday then soon.

"Volatile trade looks set to continue in the week ahead," says James Moore, analyst at

in his daily metals report. Moore says gold prices would benefit from some consolidation. "However, the mix of economic, debt and also inflation jitters will continue to draw investors towards the safe-haven asset," he said.

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Gold prices were also benefiting from a weak housing market index report in the U.S. and from worries that Ireland might need to tap the European Union and the IMF for a bailout. Reportedly,


said in a research report that the country might need more money if economic conditions worsen and if it is forced to further bail out its financial system.

Ireland's finance minister has been trying to deny the speculation but any signs of a ballooning sovereign debt crisis will push gold prices higher as investors buy the metal as insurance.

Gold prices have popped 2.4% last week while silver prices surged 4.6%. The popular gold exchange-traded-fund,

SPDR Gold Shares

(GLD) - Get SPDR Gold Shares Report

, added 6 tons of gold on Friday as investors piled into the metal. The ETF now holds more than 1,300 tons.

iShares Silver Trust

(SLV) - Get iShares Silver Trust Report

, in comparison, has 9,381 tons.

The general consensus is that gold prices will hit $1,300 some point soon as the buying frenzy for gold stays strong. But the question remains what happens after gold breaks that psychological level. Most seasoned analysts say $1,300 is just a number, but a dramatic one nonetheless.

David Morgan, founder of

, says "I would doubt it goes much beyond $1,300

in the short term; commodities don't typically like round numbers." Morgan thinks $1,350 is a possibility by the end of the year but that prices will have a few corrections before then.

Silver prices settled down 1 cent to $20.80 while copper closed 1 cents lower at $3.50.

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Gold mining stocks

, a risky but potentially profitable way to

buy gold

, were mostly higher Monday.

Video: 4 Gold Stocks Ready to Rally >>

Freeport McMoRan Copper & Gold

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

was up 2.12% to $83.45 while

Yamana Gold

(AUY) - Get Yamana Gold Inc. Report

was adding 0.74% at $10.82. Other gold stocks

Gold Fields

(GFI) - Get Gold Fields Ltd. Report


New Gold

(NGD) - Get New Gold Inc. Report

were trading at $15.07 and $6.21, respectively.


Written by Alix Steel in New York.

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Alix Steel


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