TS: Gold Prices Tread Water as Investors Eye Europe
NEW YORK (TheStreet ) -- Gold prices were treading water Monday, shaking off a firmer U.S. dollar as the metal looked towards Europe for direction.
Gold for February delivery was adding $4.90 at $1,621.70 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,624.60 and as low as $1,605.70 an ounce while the spot price was up $3, according to Kitco's gold index.
Silver prices were adding 18 cents at $28.86 an ounce while the U.S. dollar index was shedding 0.18% at $81.12.
Gold prices were stuck in a tight trading range as a stronger dollar kept a lid on prices, while strong buying prevented a deeper selloff. The SPDR Gold Shares(GLD_) has not added or dumped any tons of gold for two and a half weeks. The ETF still holds 1,254 tons of gold meaning that there is no rush into the metal but no disenchantment either.
The latest commitment of traders report showed the same kind of neutrality. For the report ending January 3rd, speculative long positions grew by almost 2,000 contracts while speculative short positions added 1,700 -- almost canceling each other out.
Vote: Where will gold prices finish in 2012?
"With the exception of one week in mid-October 2011 ... net long positions in the gold market are down to their lowest levels since May 2009," says James Steel, analyst at HSBC Securities. "We believe long positions are likely to rebuild as investors recognize they are historically low and the market is ... above its recent low of $1,521 set in December 2011."
Coin sales from the U.S. Mint were 9% higher in December year on year but full year sales were down 13%, according to Barclays Capital. "The US Mint has said it does not expect to allocate American Eagle gold bullion coins in early 2012 as it has enough coins to meet demand."
For gold to find any kind of momentum, prices need to break above the 200-day moving average, now around $1,634 an ounce. It's a level many traders are waiting for before jumping strongly back in.
Gold will also be looking to the euro for direction. Although the currency fell 2.2% versus the dollar in the first week of 2012 while gold rallied 3.2%, which means gold might be trying to shake off its direct correlation to the euro, headlines out of Europe will continue to sway the gold price.
German Chancellor Angela Merkel and French President Nicolas Sarkozy were meeting in Berlin Monday to discuss fiscal union. Italian Premier Mario Monti and Merkel will meet on Wednesday and Italy and Spain will try to borrow money in their latest debt auction for yields under 7%.
The Eurosystem's balance sheet, including national central banks and the European Central Bank, grew by 729 billion euros since the second week of August, which means that the ECB is pumping a lot of money into the system. Although the extra cash hasn't made it into mainstream inflation expectations yet -- Eurozone inflation is around 2.8% -- those worried about the future weakness of the paper currency might turn to hard assets like gold for protection.
