Gold Surrenders Gain, Closes Down

Updated from 1:23 p.m. EST

Gold futures reversed ground and ended lower Monday after a modest morning rally petered out.

February-dated bullion contracts closed down $2.30 at $634.10 an ounce on the Comex division of the Nymex. The exchange-traded funds that hold bars of the metal, streetTracks Gold Shares (GLD Quote) and iShares Comex Gold Trust (IAU Quote), were lower by 0.3% and 0.4%, respectively.

"Short-term profit-takers locked in a quick profit," says Jon Nadler, an analyst at Montreal-based bullion dealer Kitco, who noted that the advance ran into heavy resistance at about $640.

He adds that longer-term investors should provide the market with solid support going forward. "New pension funds are looking at jumping in [to the precious metals space], and we're seeing some [before] tax-season realigning," Nadler says.

Adding to the downward pressure was a slightly stronger dollar. One dollar was buying 121.65 yen, up from 121.23 yen late Friday. A euro would buy $1.295, vs. $1.2963 previously. Bullion prices tend to move in the opposite direction of the greenback.

With little by way of new economic data expected during the first half of the week, some investors may be waiting to hear President Bush's State of the Union speech Tuesday evening before committing significant new positions. Particular attention will likely be paid to any comments affecting energy, the U.S. economy and geopolitical issues.

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