Updated from 10:30 a.m. ET with latest information on the spike in gold prices
NEW YORK (TheStreet) -- Gold prices surged in afternoon trading Wednesday as a so-called short-covering rally erased losses suffered earlier this week.
Gold for February delivery at the COMEX division of the New York Mercantile Exchange was gaining $26.20 to $1,247 an ounce. The gold price traded as high as $1,251.50 and as low as $1,210.80 an ounce, while the spot price was jumping $24.49.
A raft of positive economic data, following the worst November since 1978, failed to push the yellow metal below key technical support at around $1,210 an ounce. With better-than-expected November manufacturing activity and a positive pop in private payrolls, traders decided to vacate their short positions, Graham Leighton, a trader at Marex Spectron said in a phone interview from New York.
"These [traders] have been short gold for the last month or so," said Leighton, who added that one person "took their chips off the table," which triggered other traders to do the same. "The result of that is just a short-covering rally."
Prices dipped slightly on Tuesday and nearly $30 on Monday as the manufacturing data suggested that the economy is improving at a fast enough pace to force the Federal Reserve to scale back its economic stimulus program sooner rather than later.
"I think people are looking at the Fed potentially tapering next week, and I just do not believe that is on the table," Peter Hug, global trading director at Kitco Metals, said in a phone interview.