Where Gold Prices Are Trading Today and What's Next

Gold prices were trading higher today in the morning, but took a dip as U.S. stocks and the dollar moved higher.

where gold prices are trading today

Just before Wall Street's opening bell, gold prices were higher by $5.70 an ounce at $1,215.50. That followed a slim gain on Monday. The yellow metal on Monday snapped a three-day losing streak, ending up $1.10 to $1,209.60 an ounce.

A modest pullback in the greenback over the past couple of days helped gold get this week's boost. A strong dollar has pressured gold, and the overall commodity sector, over the last couple of weeks. After closing last week at a 13-year high, the U.S. Dollar Index ticked lower today.

Gold prices have been under pressure since Donald Trump won the Nov. 8 presidential election.

After spiking in overnight trading on Nov. 9, climbing as much as 5%, or $64 an ounce, gold prices finished the session down $1 at $1,273.50 an ounce. The sharp reversal in gold prices was due to a quick rebound in the dollar, as well as a vigorous global rally.

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Hopes for a return of robust U.S. growth, less banking regulation, corporate tax cuts, and hefty infrastructure spending have driven investors to riskier assets like stocks and away from safe-haven gold.

The Dow, the S&P 500, and the Nasdaq all closed at record highs on Monday. Today, the Dow hit 19,004 in early trading, passing 19,000 for the first time.

Investors are betting that Trump's plans to boost spending and growth will lead to a higher rate of inflation, faster interest rate increases, and a stronger dollar.

Stocks' strong showing as we head in the U.S. Federal Reserve's meeting next month has lifted the likelihood of an interest rate hike. Market odds of an interest rate increase after the Dec. 13-14 FOMC meeting are currently at 100%, according to CME Group's FedWatch Tool.

Gold prices struggle to compete with interest-bearing assets in a rising interest rate environment. Yet traders say a rate hike is already baked in to the price of gold and that the yellow metal is poised to move higher.

Here's why...

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Gold Prices Poised to Move Higher into 2017

The U.S. central bank is getting ready to end a near decade of near-zero interest rates. Some investors think that's a negative for the gold price when in fact it's a positive.

You see, those record-low rates have artificially inflated stock prices and overly cushioned the economy. The end of easy money means the United States will be facing the end of one of the biggest credit bubbles ever. Savvy investors are preparing for the inevitable by piling into money-alternative gold.

Meanwhile, global central banks have totally distorted the worldwide financial system with ultralow interest rates. Two-thirds of global debt trades at 1% or less.

Loss of confidence in and the increasing ineffectiveness of global central banks are reasons enough to hold gold.

Here are some others...

Uncertainty over a potential trade war, rising geopolitical tensions, and portfolio diversification are three more reasons to hold gold.

Gold prices are now more than $150 below their July 6 peak of $1,366.25 an ounce. Still, the yellow metal is up 14% so far this year and is on track to end 2016 sharply higher than its 2015 close of $1,060 an ounce.

And gold prices are likely to finish the year smartly higher from current levels...

Money Morning Resource Specialist Peter Krauth says gold prices might see some more weakness for a little while longer. But he expects a bounce from healthy bargain hunting.

"Given the limited time remaining in 2016, and unless we face an unexpected sell-off, gold looks to end the year in positive territory," Krauth wrote last week. "If the rate hike news gets sufficiently priced in ahead of its announcement, we could see gold climb into year's end, perhaps even grappling for the $1,300 level."

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