Gold prices recovered on Friday after a dramatic 3% one-day selloff

Gold prices were recovering Friday after a dramatic 3% one-day selloff as the U.S. dollar came under pressure.

Gold for December delivery was rising $7.60 to $1,727.80 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,733 and as low as $1,711.40, while the spot gold price was up $9, according to Kitco’s gold index. Gold’s strength was entirely due to the change in the U.S. dollar as physical demand was actually $4 lower, according to Kitco’s index.

Silver prices were shedding 40 cents at $31.90 an ounce. TheU.S. dollar index was down 0.5% at $77.89.

Gold prices were stabilizing after a broad market selloff Thursday which indiscriminately dragged down stocks and commodities. At the core of gold’s volatility is fear radiating from the Eurozone as borrowing costs rise for Spain, Italy and France. Anything that pressures the euro and spooks markets bleeds into gold as investors need to raise money to cover losses or just want cash.

“When you have a sharp market selloff you get fund redemptions, you get individuals closing accounts or taking money out and you get margin calls,” explains Adrian Day, president of Adrian Day Asset Management, “and you get forced selling … so they sell gold.”

Day believes that investors sell what they can, not what they want to, and as a result gold prices will stay volatile but keep moving higher. “People have been buying gold because they don’t trust paper money … and nothing has changed in that respect.”

Not everyone agrees. Jon Nadler, senior analyst at Kitco.com, is very concerned that gold prices aren’t making record highs despite the fact Europe is in its worst chapter yet of its sovereign debt crisis. “Frankly the fact that it’s not trading at $1,900 plus is a worrisome sign to me.”

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Posted by admin on Nov 18 2011. Filed under Gold price. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry