Gold Falls as Short-Term QE3 Hope Fades (Update1)

Updated from 10:43 a.m. EDT with settlement prices

NEW YORK (TheStreet) -- Gold prices dropped Friday as nonfarm payrolls didn't indicate a likely move by the Federal Reserve next week to initiate quantitative easing.

Gold for August delivery settled down $30.50 to $1,578.90 an ounce on the Comex division of the New York Mercantile Exchange. The gold price traded as high as $1,610.60 and as low as $1,576.40 an ounce, while the spot price was down $23.80, according to Kitco's gold index.

"The fact that the United States is still adding jobs -- and 80,000 still wasn't too disappointing in many respects -- I think it just elongates maybe the time span that we see quantitative easing coming in with comparison to Europe," said James Moore, precious metals analyst at FastMarkets.com.

Silver prices for September delivery dipped 75 cents to settle at $26.92 an ounce, while the U.S. dollar index was climbing 0.66% to $83.38.

Some analysts held ahead of Friday's nonfarm payrolls report that the only a big miss would possibly have forced the Fed's hand to consider so-called QE3 next week. As it stands -- especially considering gold's move downward -- this scenario appears unlikely in the short-term.

"There's a part of me that believes a lot of people are hoping for a very very bad [nonfarm payroll] number so we get more liquidity," Jeffrey Sica, president at Sica Wealth Management, said in a previous interview. "I think if we just come out lower or a little better that's going to be the worst scenario. I think people are going to either want it really bad or really good."

For now, investors suspect gold will continue to trade within its current range until more economic events begin to emerge. What happens to gold through those events depends on how positive or negative the numbers turn.

Should the economy continue to show sluggish improvement, gold could benefit. But a lack of Fed or central bank action from Europe would probably keep the yellow metal trading sideways.

"Sort of the rangy-type trade I think may be starting to sort of set in a little bit," said Moore. "You've already seen sort of $1,525 [to] $1,625 as the range, I mean the key for gold is the fact that we've yet to break overhanging trend line resistance that's been in place since February."

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