by Alix Steel
08/16/10 – 08:45 AM EDT
NEW YORK (The Street) — Gold prices were climbing Monday as persistent signs of a weakening global economic recovery reignited gold’s appeal as a safe haven asset.
Gold for December delivery was adding $7.90 to $1,224.50 an ounce at the Comex division of the New York Mercantile Exchange. The gold price today has traded as high as $1,226.40 and as low as $1,216.20. The U.S. dollar index was slipping 0.47% to $82.53 while the euro was rallying 0.68% to $1.28 vs. the dollar. The spot gold price Monday was rising more than $10, according to Kitco’s gold index.
Investors bought gold Monday on news that China surpasses Japan as the world’s second largest economy after Japan’s economy grew an annualized 0.4% in the second quarter vs. 5% in the first quarter. China is expected to grow this year at 10% with its nominal gross domestic product for the second quarter ramping up to $1.337 trillion.
The news only served to spook investors, however, and led them to dump risky stocks for the safety of gold. Many analysts are worried that China won’t be able to sustain this explosive growth. Last week China’s customs bureau said its trade surplus ballooned to an 18-month high as imports rose only 22.7%, well below expectations, as the country bought less. China has also taken steps in recent months to decrease the amount of money in circulation by requiring banks to hold more money in their reserves.
Reports that the Hindenburg Omen was triggered last week also served to scare investors into gold. The Dow Jones Industrial Average’s triple digit free fall Thursday triggered a technical anomaly, the Hindenburg Omen, which can forecast a market crash. Although there are a lot more technical indicators and market conditions needed to create this perfect storm, the news generated enough buzz to increase gold’s safety appeal.
“Despite the decline in economic optimism, metals are in a positive mood this morning with gold trading at a one-month high above $1220,” says James Moore analyst at TheBullionDesk.com in his daily metals report. “Clearance of the $1,215-18 band could open the way to challenge resistance above at $1,244.”
Gold prices have rallied 2% in August while the Dow Jones Industrial Average fell 1.5%. Investors might be forced to take profits in gold to cover losses in stocks. But if gold is able to break through and hold the $1,230 level, then many investors could buy gold for fear of missing another big rally.
Silver prices were adding 11 cents to $18.22 while copper was up 1 cent to $3.27.
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