Gold for December delivery added $33.30 to $1,814.70 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,825 and as low as $1,765.40 while the spot gold price was up $19, according to Kitco's gold index.
The pressure is on Europe to act swiftly and efficiently to avoid a Greek default and prop up other struggling nations with more than a band aid. The central banks have done their part by providing more dollars to European banks throughout the end of the year as more and more get frozen out of the credit market. Now the heat is on European politicians.
Officials are meeting in Poland along with U.S. Treasury Secretary Timothy Geithner, where he is pressing leaders to expand the 440 billion euro stability fund, where countries can, in essence, borrow cash. There isn't enough cash to go around if all the weak countries come begging. Leaders will reportedly look at the U.S.' TALF, Term Asset-Backed Securities Loan Facility, as a model, which was used to spur lending in 2008.
On the one hand, if some plan comes out of Poland this weekend that shows Europe is committed to all of its members and will take drastic steps to help them, stocks could rally and investors will have less reason to own gold as a safety net. Conversely, if politicians fail to deliver then the continued uncertainty could prompt more safe haven buying into gold.
The uncertainty leads to volatility with $40-$50 more the norm now for gold. "What is more important is not the relative dollar change," says Mark Thomas, chief investment strategist of HigherGoldPrices.com, "but the percentage change day-to-day." At these record high levels, a $50 move is 2%-3%, which Thomas says should be expected at these prices. "However, a $100 move in one day is 5% plus move at current prices and that is extreme."
Once gold popped over the $1,800 an ounce level, momentum traders -- those that don't want to miss higher prices -- piled into the metal.
David Banister, chief investment strategist at TheMarketTrendForecast.com, thinks that gold is in a 13-year up-cycle and that there is two to three more years left. "The next major pivot top is about $2,300-$2,350 but we may not see that until some point next year."
Banister thinks that world central banks will be able to fund European banks until the end of the year to buy leaders time to figure out a better long term solution but that it's just a short term solution. "Initially you are going to have some people selling gold on that news but I think this is all part and parcel of a normal consolidation for gold." The consolidation could take gold as low as $1,640-$1,660 but Banister thinks prices might find support in the mid-$1,700s.
Gold mining stocks were popping. Kinross Gold(KGC_) was up 2.18% to $17.38 while Yamana Gold(AUY_) was adding 3.76% at $16.42. Other gold stocks, Agnico-Eagle(AEM_) and Eldorado Gold(EGO_)were trading at $68.53 and $20.35, respectively
