Gold for December delivery rose $28.50 to settle at $1,788.10 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,789.40 and as low as $1,745, while the spot gold price was up almost $30, according to Kitco's gold index.
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Silver prices closed 57 cents higher at $34.68 an ounce. TheU.S. dollar index was down 0.99% at $76.87. Italy's borrowing costs were sinking as the lower house of Parliament voted on almost 60 billion euro worth of austerity measures. The bill passed the Senate earlier in the day. Parliamentary approval would seal the fate of Prime Minister Silvio Berlusconi, who has said he plans to resign after the measures are passedThe interest on long term borrowing for Italy fell to 6.45% after soaring to more than 7% earlier in the week. The euro was rallying which was pressuring the dollar and helping the gold prices. If the crisis really abates, however, then gold might see a "relief selloff," says Adrian Ash, head of research at BullionVault. Ash also thinks that MF Global had a bigger impact on the gold futures market as it sucked the hot money out of gold, which would also explain why the metal has had a hard time making record highs despite panic over Greece and Italy. Traders whose positions are frozen and who don't have enough cash to move their trades to another firm might be forced to use options on gold to hedge their bets with puts - betting against higher prices - or calls -- betting for higher prices. As a result, the futures market could stay volatile until traders get control of all their cash. David Banister, chief investment strategist at TheMarketTrendForecast.com, says "the $1,750s need to hold as support," and he still thinks that gold should rise to $1,840 an ounce.
Ash thinks gold is torn between inflation - if the European Central Bank has to print money to save Europe - and deflation - as European banks are responsible for half of global credit supply. In 2008, when the destruction of Lehman Bros. caused a deflation panic, the gold price in dollar terms lost a third of its value but in the pound and euro it hit new records. Ash thinks something similar could happen this time around "as the oxygen came out of the futures market ... you had physical demand coming through ... when the two met then gold rose very sharply."
Jon Nadler, senior analyst at Kitco.com, on the flip side, thinks that the U.S. dollar will remain the ultimate safe haven and the only currency left standing. "Here we have assets [gold and silver] that should be hand in hand rallying," says Nadler, whereas gold and silver have decoupled of late, "and of course with the crisis being at its most intense phase one would expect them to be significantly higher than they both are."
Nadler thinks the U.S. dollar index will rise back to the $80 level which "will be somewhat depressive for the commodities complex." Gold mining stocks were skyrocketing higher Friday Kinross Gold(KGC) was jumping almost 4% at $14.36 while Yamana Gold(AUY) was adding 3.31% at $16.56. Other gold stocks, Agnico-Eagle(AEM) and Eldorado Gold(EGO) were popping at $47.35 and $19.40, respectively. -- New York.>To follow the writer on Twitter, go to http://twitter.com/adsteel.
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