Wednesday, December 23, 2009

Gold Prices Climb as Dollar Stalls

. Wednesday, December 23, 2009

By stockOzone team

Spot gold bounced Wednesday from the seven-week low it hit Tuesday as the dollar ascent paused in Europe.

At 1027 GMT, spot gold was trading at $1,082.55 an ounce down 0.1% from Tuesday's close. Gold for February delivery on the Comex division of the New York Mercantile Exchange was at $1,083 an ounce.

The precious metal could still trade down to $1,050 a troy ounce, however, before the year ends if the dollar rises further, traders and analysts said. They added prices are easily moved given the holiday-thinned trading volumes.

"In the run-up to year end, we expect gold to see further pockets of long liquidation," said James Moore of

A rise in equities -- with U.S. stocks nearing 14-month closing highs Tuesday -- and some data out of the U.S. indicating a slow recovery helped boost the dollar and hit gold prices in recent days.

"It's quite possible we have seen the peak in gold," said Erik Davidson, Wells Fargo Private Bank's managing director of investments in the western U.S. "In 2010, I think things will go back to normal, i.e. a growing economy, and normal takes a bit of fear away from gold."

Mr. Davidson says he thinks gold will trade between $800 an ounce and $1,200 an ounce for the "foreseeable future."

After hitting a record high of $1,226.30/oz at the beginning of December, prices have fallen some $150 at the same time as the dollar rose against the euro. But while Mr. Davidson said gold isn't likely to hit $2,000 an ounce, others still argue that 2010 will see a renewed rise in the precious metal amid loose monetary policies, low interest rates and the risk of inflation down the line.

Jeffrey Nichols, managing director at precious metal asset firm Rosland Capital LLC, said gold will trade to $2,000 an ounce in a few years but will have "high volatility and sharp reversals along the way."

The other precious metals were mixed. At 1027 GMT, spot silver was at $16.92 an ounce, down 0.2%. Spot platinum was at $1,395.50 an ounce, up 0.4%. Spot palladium was at $352.40 an ounce, up 0.1%.

Disclosure: Author does not own any of the stocks discussed here.

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