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Gold Prices Settle Higher

Gold prices rose Thursday as weak initial jobless claims and manufacturing data pushed investors into gold.
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Gold prices

rallied past $1,230 an ounce Thursday as investors bought gold after more signs of a weak labor market.

Gold for December delivery settled up $4 at $1,235.40 an ounce at the Comex division of the New York Mercantile Exchange. The gold price traded as high as $1,239.50 and as low as $1,229.50 in Thursday's session. The

U.S. dollar index

was up 0.21% to $82.40 while the euro was down slightly at $1.28 vs. the dollar. The spot gold price was also adding more than $2, according to Kitco's gold index.

Gold prices were rising after the Labor Department said weekly initial jobless claims for the week ended Aug. 14 rose to 500,000 last week. That news, along with a weak read on manufacturing activity in the Philadelphia region, underscored worries that the U.S. economic recovery is stalling out.

Gold prices were flat before the jobs news as relatively positive news out of the Eurozone gave investors little impetus to buy gold as a safe haven asset.

Greece will be able to receive its next lump of financial aid and Bandesbank, the German federal bank, increased growth prospects in Germany for 2010 to 3% from 1.9%. The upgrade was in contrast to the European Central Bank's statement last week that strong growth within the European Union could not be sustained. Germany's producer prices also rose more than expected indicating demand for goods.

Gold prices settled above $1,235 an ounce Thursday for the first time in more than six weeks, but might have a hard time picking up steam. Lack of volume and headline news could keep gold in a lackluster trading range, which many analysts expect to remain for the rest of the summer.

Summer months typically are slow buying periods for gold as trading volume peters out and China and India consumers curb their gold jewelry buying. In the fall, festival and wedding seasons in Asia jumpstart customer demand.

Frank Holmes, CEO of U.S. Global Investors, said in a recent note that historically the "September price rises 2.5% above the August price," which would take prices past their all-time intraday high of $1,264 an ounce.

Investors have been shoring up their gold positions recently. Nicholas Brooks, head of research and investment strategy for ETF Securities, says the firm's gold exchange-traded fund,

ETFS Physical Gold Shares

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(SGOL) - Get abrdn Physical Gold Shares ETF Report

, the smallest physically backed gold ETF in the U.S., "saw nearly $100 million of inflows

last week ... it does appear that investors are moving back pretty strongly into the physical gold

products and we've seen continued inflows this week."

"Overall, the key driver of gold is going to be the sovereign risk issue and whether we are moving towards slower economic growth on sort of a 6-12 month view and I think the jury is still out on that."

The most popular gold ETF,

SPDR Gold Shares

(GLD) - Get SPDR Gold Shares Report

, also added 10 tons in the past week bringing total tonnage close to 1,300. The GLD saw $7.7 billion of inflows in the first half of 2010 and is now the second largest ETF in the world.

Video: Investors Love Gold ETFs >>

Some potential variables for gold are U.S. dollar strength and headline risk. If the U.S. dollar stages a mid-August rally, gold prices could suffer as the dollar-backed commodity becomes more expensive to buy in other currencies. On the flip side, because trading volume is so thin any news, either negative or positive, could cause a rush into or out of gold leading to greater volatility.

Silver prices

closed 7 cents lower at $18.32 while copper settled down 3 cents to $3.31.

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Gold's steady rise in the past week is not only good for future prices but also good for gold stocks. Holmes says as gold moves 2.5% in September "gold miners

can make an 8.3% leap in September. In September 2009, the jump was 14.5%."


Market Vectors Gold Miners ETF

(GDX) - Get VanEck Gold Miners ETF Report

, a basket of large gold miners, has risen 3.6% since June 1 while gold prices are relatively flat. Shares were slightly lower on Thursday at $51.77.

Gold mining stocks, a risky but profitable way to

buy gold

, were mixed.

Yamana Gold

(AUY) - Get Yamana Gold Inc. (Canada) Report

was down 1.06% to $10.22 while

AngloGold Ashanti

(NEM) - Get Newmont Corporation Report

was relatively unchanged at $44.11. Other gold stocks

Kinross Gold

(KGC) - Get Kinross Gold Corporation Report


Freeport McMoran Copper & Gold

(FCX) - Get Freeport-McMoRan Inc. Report

were trading at $15.62 and $72.27, respectively.


Written by Alix Steel in New York.

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Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.