Gold and Silver Prices Struggle Higher

Source: The Street, Alix Steel  (2/7/11)

"Physical buying supported prices, technical selling prevented rallies."

Gold prices were struggling higher Monday as physical buying supported prices but technical selling prevented any rallies.

Gold for April delivery was up $1.90 to $1,350.90 an ounce at the Comex division of the New York Mercantile Exchange. The gold price Monday has traded as high as $1,354.50 and as low as $1,344.10. The spot gold price was up $1.40, according to Kitco's gold index.

The U.S. dollar index was adding 0.27% at $78.26 while the euro was slipping 0.48% at $1.35 vs. the dollar.

Gold is still trading in no man's land with the metal searching for a catalyst. The metal has seemed to stem its violent January selloff which brought prices down to $1,307 and close to the $1,300 support level. Friday's disappointing jobs number did little to help gold despite the fact that it ensured no rate hike in the near future.

"Trade [will] likely remain volatile as investors react to Friday's jobs data," says James Moore, research analyst at fastmarkets.com, "Gold. . .has found good support around $1,344 but requires a break above the 100-day moving average, $1,362.20, to avoid another round of stale long liquidation."

An interest rate hike might be in the future for England as its central bank meets Thursday. Inflation in the country hit 3.7%, well over the limit of 2%, and rumors have been bubbling about a rate increase, the first since 2007. But with unemployment around 8% and youth unemployment at 10%, England will have to weigh the risks of fighting inflation and limiting growth. The European Central Bank chose growth last week by keeping its interest rates at historically low levels.

An interest rate increase could provide more headwinds for gold.

Other emerging-market economies with heated inflation are still hesitant to raise rates, but are taking more gold-friendly action.
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