Gold Price Spikes after Dip of 2% during February 2012

After declining by over 2% in just 2 days, gold prices went up on Tuesday, 7th February. The spot price for gold rose by around $28 on Kitco old index, to reach $1,745. The gold futures on NYMEX, which are due in April, also gained by $23.50 to close at $1,738.40 for the day. Silver prices also increased by 44 cents on Tuesday, to reach $34.19/oz. On the other hand, there was a decline of .63% in the US dollar index.

What caused the price rise?

As you would have already guessed, a weak dollar was one of the reasons for hike in gold prices on Tuesday. Greece’s economic condition and debt situation, which was a reason for fall in gold prices last month, had also become one of the reasons for the price rise on Tuesday. In six months, Greece has been able to raise over 812 million Euros with lesser returns, which had boosted the euro to a certain extent. Added to that, there was hope that the Greek government would come to a consensus on taking measures for another bailout soon. This optimism, in spite of civilian unrest due to job cuts in the country, has been able to strengthen the euro, which in turn had helped in boosting gold.

Is fall in dollar really a cause?

While many felt that the weakening dollar was a cause for the price rise, RBC Capital Markets’ senior Vice President, George Gero, thought otherwise. According to Gero, the optimism that the Greek leaders meeting will end positively is what moving the Euro up against the dollar. This, he feels, has provided a short-term support for gold leading to price rise.

Gold stock performance

While gold and silver gained in the futures and the spot markets, gold stocks were struggling to keep up during the day. Gold mining stocks on the NYSE had declined on Tuesday, as opposed to the physical gold prices. Kinross Gold (NYSE:KGC) had declined to $11.11 and Randgold Resources (NASDAQ:GOLD) went down by 2.66% reaching $114.87. Agnico-Eagle (NYSE:AEM) and Eldorado Gold (NYSE:EGO) were other gold stocks that had declined during the day.