Gold gains on European debt fears
Prices get a double-digit lift as investors seek safety.
By Alix Steel, TheStreet
Updated at 5:08 p.m. ET
Gold for February delivery, now the most actively traded contract, settled up $18.60 to $1,386.10 an ounce at the Comex division of the New York Mercantile Exchange. Gold Tuesday traded as high as $1,391.10 and as low as $1,364.
After hitting a 10-week high early, the U.S. dollar index was adding 0.6% to $81.31, while the euro was losing 0.7% to $1.30 against the dollar. The spot gold price Tuesday was rising $18.80, according to Kitco's gold index.
Gold prices and the U.S. dollar were rising in a broad flight to safety. The euro broke below the 200-day moving average as investors continued to dump the currency on fears that Europe's debt woes will spread to Italy, Spain, Portugal and Belgium. Despite reassurances that only bonds issued after 2013 would be affected if an insolvent country needed a bailout, current bondholders were still worried they would be on the hook if a country were to take financial aid.
The amount of interest struggling countries have to pay to get a loan were rising across the board. The yield on the 10-year Treasury bond in Portugal rose to 7.28% Monday, as the country sweetened the pot for investors, while the German bund was yielding 2.74%.
The Bank of Portugal wasn't helping the euro either, warning in its midyear report that its inability to borrow cheaply from the debt market poses "serious challenges" to its financial system. The lack of money along with new capital rules from Basel III, which requires banks to hold more money in their reserves to help protect against losses, reinforces the "recessionary pressures on economic activity."
The uncertainty in Europe was good for gold as investors opted for the haven metal over "risky" paper currencies or volatile stocks. Gold prices were up by double digits, but the U.S. dollar was also benefiting from the flight to safety and the strong currency could temper gold's gains.
"If we can close above $1,380, that would change us from sideways to down to sideways to up," says Jeff Friedman, a senior market strategist at Lind-Waldock. "If we have a pullback, I am defiantly a buyer. . . . I am looking at $1,351 and $1,340 and definitely $1,325. I do not believe we are going to break $1,300. . . . I think the low is in for the month of November and December."
Friedman says the most important item on the agenda this week for gold will be Friday's unemployment report for November. Briefing.com is expecting private sector jobs to grow by 175,000 versus 159,000 in October. The number "shows the health of the economy in the U.S.," says Friedman, and will directly impact the dollar.
Gold and the U.S. dollar typically trade inversely to each other, although investors can buck this trend when the flight to safety heats up.
Gold prices are in store for more volatility until the end of the year as sellers contend with bargain-hunters and those wanting to add gold to their portfolio before the new year. During December, traders selling gold future contracts must also deliver physical gold, and buyers must pony up the cash, which increases liquidity and volatility in the market.
Gold prices will also take cues from overseas. India reported annualized growth in the July to September quarter of 8.9%, compared to 2.5% growth in the U.S. Growth estimates for the full year have been revised to 8.75%.
With India growing at a gangbuster rate, investors are now worried that India and China, also reporting explosive growth, might be forced to raise key interest rates to combat inflation and regulate expansion. Higher interest rates would make it more expensive to borrow money and decrease the country's purchasing power.
China and India are both credited with supporting physical global gold demand and being instrumental to higher prices. In the third quarter, jewelry demand grew 36% in India and 8% in China, totaling 285.8 tons, about a third of total identifiable gold demand, according to the World Gold Council.
A decrease in purchasing power or personal savings in China and India could damage the countries' historical propensity to buy gold jewelry as gifts during wedding and festival seasons.
Silver prices rose $1.02 to settle at $28.21 per ounce on the March contract on the Comex, while copper closed 6 cents higher at $3.82 per pound.
Gold mining stocks, a risky but sometimes profitable way to buy gold, rallied Tuesday. Barrick Gold (ABX) rose 2.6% to $51.65 while Newmont Mining (NEM) closed 1.3% higher at $58.83, and Agnico-Eagle (AEM) gained 3% to $80.71.
i don't care about the eur. or gold ,and silver--don't have money to buy any anyway--what i care about is fuel,nat.gas,electricity,water,sewer bills,house payments,and to top it off groceries -- what are we , going to do about this ? when we have no money , and can't afford to buy gas to look for work !! 90,000>> the size of a very small city<< go to work and it drives the mkt. up 250 "GO FIGURE" what to do about the 15 million that are still out of work , and now , with unemp. bennies running out --what are our great bankers going to do with the new list of foreclosures coming at em ? it's going to be a thrill to watch this thing go "BANG" in about two months !! as my dad use to say ( it's going to be kaaa poot )
my thoughts only--backed by nothing but experience !!
The trade off is the discontinuance of Unemployment benefits.
These folks are probably working for a lot less money.
Stocks soaring...Santa Claus rally?? Tell that to the millions out of work, or better still some how "trick" the millions of cold, hungry children in this country into believing things are a-OK. Ring that bell loud Wall Street, maybe you have a bonus check coming soon.
Enjoy if you can.
High rollers manipulating the market with their questionable reports. What happened with the TEMPORARY jobs of census workers? How many TEMPORARY workers hired for the holiday season and people on unemployment losing their benefits which shows less on unemployment.
These reports of the economy getting better is a bunch of s---.
We need to get the leaches and corruption out of government.
I would hate to see what would happen to the jobs market if all the service men were brought home from the wars etc. in other countries. There are no jobs NOW. And the idiots in WA who allowed all the companies to send their jobs and companies overseas should have been impeached immediately.
Obama and his corrupt administration should be impeached now...they are giving billions and billions (trillions) away to other countries and American citizens are losing their jobs, homes, going hungry yet we are paying for this corrupt administrations asinine choices. Enough is Enough.
Wow big fuugen deal,over 90k,and at the same time this week 800k will lose unemployment insurance. And might i add that over one million will not qualify for extensions.
So 90k new jobs added this month,thats not even keeping up with the over 200k that are entering the workforce.
All this new hiring is temporary for the holidays ,so i wouldnt get to excited.......
I hope better days are ahead..
The future of the planet looks gloomy, that's for sure! This story can only end badly as history shows big government will always implode a nation or nations in this case! All set up by the mortgage crisis created by the FED, Treasury, Gov Policy, and carried out by Wall Street!
Call me crazy, but I have my gold, silver, guns, bullets, seeds and debt paid down! It doesn't cost me much to be prepared but will cost me and my family everything if I listen the the main stream news and think everything is alright when its not!
well the reason they can claim that is because the unemployment pay expired today and when that happens they no longer are counted as unemplyment.
the other reason is we got the dumb ass democrats out and these new guys best do their jobs they were voted in the office to do, the people are the boss they work for us, not the other way around.
the next and biggest issue is to impeach the illegal muslim in the black house and we can get back to normal. any muslim idiot like obama that does not salute our soldiers when pinning a medal of honor on them is a reall ass. and muslims are the enemy they want to destroy the american citizen.
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[BRIEFING.COM] The major averages remain near their highs as the quiet session continues. In all likelihood, today's session will challenge yesterday's affair for the title of the slowest trading day of the year with only 172 million shares having changed hands so far at the NYSE.
NYSE floor volume stood at 191 million at this point yesterday before climbing to 479 million by the end of the session.
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