NEW YORK ( TheStreet ) -- Gold prices closed over the $1,600 an ounce level as gold decoupled from the euro and popped higher. Gold for February delivery added $12.20 to close at $1,612.70 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,619.80 and as low as $1,593.80 an ounce while the spot price was up $9, according to Kitco's gold index. Silver prices struggled down 47 cents at $29.09 an ounce while the U.S. dollar index was up 0.55% at $80.11.
Gold prices shrugged off potential profit takers and pushed higher despite a 2% gain on Tuesday. "Today we have trifecta," says George Gero, senior vice president at RBC Capital Markets, "momentum traders, higher volume, higher open interest higher moving averages, and a higher close." Gero thinks that a close over $1,615 -- an area where gold almost broke above-- would trigger buy stops, where traders buy gold at a previously determined level. Gero thinks the fear factor has sunk into gold with political tensions between the West and Iran heating up. According to Reuters, EU governments have come to a preliminary agreement to ban oil imports from Iran. Gold had been moving in tandem with stocks and the euro and inversely to the U.S. dollar in early trading. The euro was struggling Wednesday and dragged gold along with it after mixed bond auctions out of Europe. Germany raised just over 4 billion euros, shy of the 5 billion it was hoping for. The interest it had to pay fell to 1.93% but demand was tepid. Portugal on the other hand raised the 1 billion euros it was hoping for, yields also fell and demand was stronger. UniCredit, Italy's biggest bank, also said it would try to raise just under $10 billion worth of shares at a 43% discount to Tuesday's closing price reflecting how desperate European financial institutions are for money. Hungary canceled its debt auction, which also caused the euro to move lower. With investors reminded of continued uncertainty in Europe, they are responding with wish-washy enthusiasm for gold. Phil Streible, senior commodities broker at RJO Futures, thought that the early morning pause in gold prices would trigger more buying. "Customers missed that first day of the pop so there are people that are real anxious to add positions on." Streible says there are a lot of people still on the sidelines and that any kind of small set back will force their hand. "There has been some small buying around the $1,600 range," he says. Streible is looking for a close over $1,650 an ounce for serious momentum to kick in and then expects prices to retest the $1,750-$,1800 an ounce level. "I don't think the
$1,523 lows are something that are going to be seen for a while." Many fund managers and investors might also be diversifying into gold in the beginning of the year. "It's a different mentality at the start of the year," argues Streible, "fresh money comes back in." With managers looking for those assets that delivered solid returns, gold shines up 10% in 2011 despite its volatility. "There is likely to be more room to the upside for gold," says James Steel, analyst at HSBC Securities, "but much may depend on the direction of the euro." Possible lending underlying support for gold prices was the news that central banks bought 344 tons of gold in the first 11 months of 2011 with Turkey and Russia taking the lion's share. Steels says that "current low prices may encourage further central bank purchases and help push gold prices higher." Despite gold's price swings in the past few weeks, investor demand has remain constant. The SPDR Gold Shares ( GLD), the most popular gold ETF, has held 1,254 tons of gold in the trust for the past two weeks, which shows that big funds and investors are not rejiggering positions in the ETF. Gold mining stocks were wobbly. Kinross Gold ( KGC) was slipping 0.75% at $12.18 while Yamana Gold ( AUY) was down 0.23% at $15.29. Other gold stocks, Agnico-Eagle ( AEM) and Eldorado Gold ( EGO) were lower at $37.50 and $14.64, respectively. Alix Steel in New York. >To contact the writer of this article, click here: Alix Steel.