The spot rate gold price has dipped back to $1,122.10 per ounce thanks to the continuing resurgence of the dollar. The dollar has improved slowly but steadily in recent weeks as it becomes more likely the Fed will raise interest rates sometime in the next several months.

Gold prices fell sharply in early morning New York Mercantile Exchange, briefly dipping below $1,120. This after a close of $1,137.60 on January 19th. The dollar is the major catalyst as it has also made strides against other major currencies Wednesday (January 20), most notably the Euro.

Financial institution earnings news appears to have provided some of the leverage for dollar buying as Wells Fargo reported an unexpected profit and JPMorgan also showed gains.

A report from the Labor Department Wednesday also showed that producer prices climbed .2 per cent over the course of December. This was largely attributed to food prices, which climbed more significantly, making the biggest year-on-year gain since October of 2008.

A republican victory in the all-important Massachusetts Senate race to replace Ted Kennedy may have also given speculators more comfort in buying higher risk growth investments. The Republican Party now holds 41 of the 100 senate seats. The one seat gain is a major factor going forward as it now affords the Democrats no longer hold the all important two-thirds super majority to prevent filibusters.

Some Americans have become increasingly concerned about the direction of the economy under the President O’bama Administration. He has been criticized for excessive spending and for not helping the economy improve quickly enough. The ability for Republicans to offer more resistance to the Democratic platform may have bolstered some investors to buy less conservatively. This may also have affected the drop in gold prices Wednesday morning.