Gold Rises on Fears Even as Markets Poised to Soar

Options hedging; Fed may hold key as housing reports are released

Even though gold set new records at the close of the markets on Friday, there was hope among U.S. investors that the S&P 500 would break 1,130 next week if there were even a hint of good news from the Fed.

According to Reuters reports on Friday and Saturday, worries over low consumer confidence in the U.S. and fears in the European markets that the Fed would use further "quantitative easing" to head off a double-dip recession contributed to the all-time high gold reached--$1,282.75. The price dropped a bit as profit-takers swooped in, but then rose again once the consumer news hit the markets, but U.S. December futures closed at $1,277.50, up by $3.70.

Silver too hit close to $21 an ounce; it has not been in that territory since 1980. However, Tom Kendall, Credit Suisse analyst, warned in reports against such levels, citing silver's history for "overshooting and undershooting . . . I would not be recommending anyone to get long or longer silver at $21."

Meanwhile, back on stocks, options trading seems to indicate that many see 1,130 as the peak and are looking to guard against drops. But others seem to be pinning their hopes on the Federal Open Market Committee policy meeting on Tuesday, anticipating further monetary easing, perhaps by the purchase of U.S. Treasuries.

Housing data due for release during the week could prove the deciding factor in which way the Fed's policy swings. The housing market index comes out Monday; Tuesday is the release of housing starts; and existing home sales and new home sales will be released on Thursday and Friday, respectively.

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