Gold Prices Up on Short Coverings, Silver Prices Climb More Than 1%

Gold prices extended gains during Asian trading hours on Thursday as broadly weaker dollar continued to support the demand for dollar-priced assets. Traders cited short coverings as another reason why the bullion was gaining for the second straight day. Silver prices also rose sharply in early trading on Thursday.

At last check, gold futures for December delivery gained 0.40% to $1,290.40 an ounce while spot gold was up 0.24% to $1,290.24 an ounce.

Although top officials from the Federal Reserve, earlier this week, signaled that the tapering of the bond purchase program could start before the yearend; ambiguity over when exactly the pullback could start and at what pace, is weighing on the U.S. dollar. The dollar index fell to its seven week low on Thursday. As a result, investors are short covering.

Speaking to Reuters, one Sydney based precious metal trader said, “The buying today is due to short covering since not much is happening to strengthen the U.S. dollar…Investors are selling their long U.S. dollar and buying other currencies and gold.”

According to Reuters, traders said that short coverings could push bullion towards $1,300 an ounce level mark.

Earlier this week, four top Fed officials, Chicago Fed President Charles Evans, Atlanta Fed President Dennis Lockhart, Cleveland Fed President Sandra Pianlto and Dallas Fed President Richard Fisher, all have indicated at possible tapering of the asset purchases—should economic indicators continued to show improvement. In fact, Evans and Fisher have said that the tapering could start as early as September.

If the Fed decides to taper its quantitative easing then the U.S. dollar will gain against rival currencies as investors will buy more of it due to favorable interest rate differentials. On the other hand, gold prices will sink as investors will not have any incentive to invest in the metal as it does not provide any interest.

Silver futures jumped 1.27% to $19.75 an ounce.

In pre-market trading, the iShares Silver Trust (ETF) (NYSE: SLV) was up 1.33%, and the ProShares Ultra Silver (ETF) (NYSE: AGQ) was up 1.97%.

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Post Written By: Ed Liston Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.