Weakening Dollar Helps Gold Prices to $1653

Weakening Dollar Helps Gold Prices

In the past few days, gold prices were on the rise following the ascent of stocks and the weakening of the dollar. Another reason is that investors purchased back positions that they had previously traded. Momentum traders too went in when gold broke above its moving average for 200 days. The prices went over technical levels. At the New York Mercantile Exchange’s Comex division, February delivery increased to $1,631.50 when it added $23.40 per ounce.

Quick Rise in Price Pushes US Market to Short Covering

The high that gold touched recently is just a little short of the level - between $1,632 and $1,635 - that most traders are looking for, per ounce. A technical analyst stated that it is important that gold close at a price over the upper limit in this range. This will eventually help it secure and retain a place in the middle of the range. According to the analyst, the majority of the rise in price happened in a day. This pushed much of the US market to short covering. He stated that till recently, the move hadn’t been big.

While a few are looking for a level close to $1,635 for gold, others believe that the precious metal should reach an even higher - $1,675. However, they do recognize the high gold reached as a first in a long time in the market. Gold prices have been inversely related to the dollar, which took a beating when the triple A system of credit rating was confirmed by an agency in France.

Debt Auctions in Spain and Italy may Affect Price of Gold

Investors are gearing up to deal with the debt auctions in Spain and Italy. Currently, Italy is required to pay an interest of 7% for ten years, to borrow money. In case costs increase, gold, stocks and the euro are likely to get affected. There appears to be a disconnect between gold and euro. This could be a result of safe haven purchasing. Trends in trading indicate that gold is performing as a commodity, not a safe haven. This makes it a riskier asset when compared to currency. The situation in Europe cannot be ignored. A debt auction to be held in the country can have an effect on the market.