Gold Prices Pop on Optimism From ECB's Draghi (Update1)
NEW YORK ( TheStreet) -- Gold prices popped Thursday after European Central Bank President Mario Draghi's announcement that economic conditions would improve in the eurozone later in 2013. Gold fell 0.4% on Wednesday .
Gold for February delivery added $22.50 to settle at $1,678 an ounce at the Comex division of the New York Mercantile Exchange. The gold price traded as high as $1,678.80 and as low as $1,653.80 an ounce, while the spot price was jumping $18.40, according to Kitco's gold index.
Draghi's comments put pressure on the U.S. dollar as the euro spiked by more than 1% on Wednesday. The yellow metal often benefits from a dip in the greenback as dollar-denominated gold becomes cheaper to purchase.
"Later in 2013, economic activity should gradually recover. In particular, our accommodative monetary policy stance, together with significantly improved financial market confidence and reduced fragmentation, should work its way through to the economy, and global demand should strengthen," Draghi said at a press conference.
Though gold reacted to the dollar's plunge on the euro currency's boost on the comments, one analyst argued the news from Draghi may still give investors pause moving forward.
"I don't know that I would call him optimistic," said Michelle Gibley, director of international research at Charles Schwab. "I would say that if you compare 2013 to 2012, Europe may not be as much of a drag on global growth, but they're still going to be sluggish."
Gibley pointed to austerity measures and under-capitalized banks as continuing major drags on the eurozone economy.
"Gold was used as an investment that's supposed to not really correlate with the stock market -- that's why a lot of investors bought it, because they were afraid of the stock market," said Yoni Jacobs, chief investment strategist at Chart Prophet. "Over the last year or so you're seeing gold increasingly correlated with the market, so instead of becoming a riskless asset, it's actually become a risky asset."
The Labor Department reported on Thursday that initial jobless claims for the week ended Jan. 5 rose by 4,000 to 371,000. Economists had expected claims to total 365,000. The rise in jobless claims also could be seen as positive for gold prices as the Federal Reserve has pegged keeping interest rates near zero to a 6.5% unemployment rate threshold. Should the rate dip to that level, the Fed noted last month, the central bank would begin to raise interest rates. The national unemployment rate ticked up to 7.8% in December -- a signal that the Fed wouldn't end low interest rates and, possibly, the quantitative easing programs.