NEW YORK (
closed modestly lower Wednesday as a weaker U.S. dollar and book-squaring led investors to buy the precious metal, but improving risk appetite weighed on prices.
Gold for August delivery settled $6 lower to $1,234.80 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,247.40 and as low as $1,225.20. The
was slipping 0.04% to $86.06 while the
euro was flat
at $1.22 against the dollar. The spot gold price Wednesday was down more than $4, according to Kitco's gold index.
Gold prices were looking for more direction Wednesday from the
, but with no luck. The Fed left rates unchanged between 0% and 0.25% for an "extended period of time." Some analysts argue that low rates mean more "free money" and raise the likelihood of inflation in the future, but the Fed's insistence that inflation was subdued and stable for some time constricted any upside for gold.
Gold prices reversed earlier gains as investors stayed relatively optimistic despite disappointing new-homes sales data from the Commerce Department. Gold prices rose more than $5 in early trading as investors made another jump to safety as
global markets fell following a late-day selloff in the U.S.
. But the positive momentum was no match for thinning volume and investors' desire to buy riskier stocks.
Gold prices will most likely stay volatile for the rest of the week as the second-quarter ends on Friday. Investors are now turning away from gold to buy riskier assets, but traders reallocating funds in their portfolio headed into the third quarter could use gold as a secure place to stash their money. This tug-of-war will create a tight trading range for gold prices.
"I'm back to $1,175 to $1,250," says George Gero, vice president of global futures at RBC Capital Markets. "I had raised
my price target to $1,300 ...
because you had a lot of weekenders coming into the market that were looking for short-term gains."
Jim Rogers Loves Gold, Buys Silver
Helping to support higher prices are dollar weakness and bargain-hunting. A lower U.S. dollar makes gold less expensive to buy in other currencies.
Gold prices have also fallen 1.6% since Monday
after touching an intraday high of $1,266 an ounce and investors have been taking advantage of dips to buy gold at a "discount." The popular gold exchange-traded fund,
SPDR Gold Shares
, added more than 5 tons Tuesday as the
Dow Jones Industrial Average
fell almost 150 points.
The risks weighing on gold are improving risk appetite and short-term trading. As equities improve, investors will sell some of their gold positions for riskier stocks. Gold is also up 10% year to date, and investors will be tempted to take profits where they can. Gold also has proven to be a valuable place for investors to put their money headed into summer weekends as headline risk from Europe and the
oil spill leaves equities too vulnerable. But the same traders then dump their gold positions on Mondays.
settled down 44 cents to $18.45 while copper lost 5 cents to $2.93.
Gold mining stocks, a more risky but more profitable way to
, were mixed.
was adding 0.05% to $61.80 while
was flat at $17.88. Other large gold miners
were trading at $5.56 and $95.82, respectively.
Written by Alix Steel in New York
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Alix joined TheStreet.com 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.