by Alix Steel
05/20/10 – 10:20 AM EDT
NEW YORK (TheStreet ) — Gold prices were reversing double-digit losses Thursday as bargain hunters beat out investors’ need for cash for protection against global uncertainty.
Gold for June delivery was rising 10 cents to $1,193.20 an ounce at the Comex division of the New York Mercantile Exchange. The gold price today has traded as high as $1,198.20 and as low as $1,175. The U.S. dollar index was rising 0.38% to $86.56 while the euro was falling 0.55% to $1.23 against the dollar. The gold spot price Thursday was rising over $1, according to Kitco’s gold index.
Bargain hunters were lifting the gold price as they bought the metal at a “discount.” In early trading, investors had been opting for cash and U.S treasuries instead of stocks and precious metals. Gold prices have fallen more than 4% this week as eurozone debt issues spooked investors.
The fear that the European Union nations would not be saved by the $1 trillion financial aid package was aggravated after Germany announced a ban on naked short-selling of some stocks and euro bonds. Reports out Thursday indicated that EU officials have agreed to a unilateral ban on short-selling. Many analysts say this panic reaction indicates some kind of impending disaster.
The euro resumed its fall towards its four-year low as Greece prepared for more protests and strikes. Investors first instinct was to flee to the perceived safety of the U.S. dollar.
“Some have [also] used this as an excuse to take profits,” says Jon Nadler, senior analyst at Kitco.com. “The prospect of dipping to the $1,150 area has now been opened and if that were to be breached then I think we have a game changer.” For now strong buying has appeared around the $1,175 level as trader again eye the new $1,250 resistance area.
Another factor subduing the gold price is reduced risk of inflation. The minutes from the Federal Open market Committee’s meeting at the end of April revealed that the Fed believes long term inflation expectations are stable and that “core inflation would remain subdued through 2012.”
This news along with data from the Labor Department that the consumer price index fell 0.1% in April took the inflation fear off the table, for now. Many investors had been buying gold in anticipation of inflation as they expected the dollar to lose value while gold retained its worth.
espite the respite in gold frenzy buying, the popular gold ETF, SPDR Gold Trust(GLD), added another 3 tons Wednesday. The GLD is physically backed, which means for every share investors buy , they own 1/10 an ounce of gold. Since its inception five years ago, the ETF, along with its peers iShares Comex Gold Trust(IAU) and ETFS Physical Swiss Gold Shares(SGOL), have become a popular way to buy gold but have also created a vehicle to speculate on physical gold, which can move gold prices depending on inflows and outflows.
Nader says, “the fact that these funds control sizable proportions of annual metal supply … if and when significant wave of redemptions come out of that fund, the effect cannot be ignored.”
Silver prices were slipping 44 cents to $17.67 while copper was down 1 cent at $2.94.
Platinum and palladium were plummeting down $88 and $37, respectively. Part of the massive decline in platinum and palladium was due to flows out of the physically backed ETFs ETFS Physical Platinum (PPLT) and ETFS Physical Palladium(PALL). Shares were falling 5.65% and 8.10%, respectively.
Gold mining stocks, a more risky but more profitable way to invest in gold, were sinking. Barrick Gold(ABX) was trading down 2.83% to $41.55 while Newmont Mining(NEM) was lower at $53.60. Other large gold companies Kinross Gold(KGC) and Goldcorp(GG) were trading at $16.80 and $41.42, respectively. Goldcorp was falling over 1% despite that fact its CEO intimated that the company could raise its dividend by 2011.
Shares of Freeport McMoRan Copper & Gold(FCX) were sinking 4.99% to $64.31 while AngloGold Ashanti(AU) was down over 2% to $39.66.
The SPDR Gold Trust(GLD) was slipping slightly to $116.50.
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