Gold Traders Play Waiting Game

Updated from 12:05 p.m. EDT

Gold prices slipped Monday as nervous investors stayed on the sidelines and traders groped to find indications of a sustained move.

Contracts for April delivery of gold closed off $1.70 at $650.30 an ounce on the Comex division of the New York Mercantile Exchange.

The bullion exchange-traded funds that hold the metal, iShares Comex Gold Trust (IAU Quote) and streetTracks Gold Shares(GLD Quote), were mixed recently.

"Traders are trying to assess whether the worst is over," says Peter Grandich, editor of the The Grandich Letter, noting that bullion prices have fallen from nearly $690 in late February to a low under $640 before rebounding somewhat last week.

Grandich views the drop in speculative positions on Comex as a positive and fully expects a bounce later this week as it becomes clearer that short-term players have been shaken out. The magnitude of those positions provides something of a contrary indicator, meaning that peaks in futures buying by speculators tend to occur near market tops, he says.

The weaker greenback may also have mitigated the session's softness, as gold prices tend to move in the opposite direction to changes in the value of U.S. currency.

One dollar would buy 117.63 yen, down from 118.23 yen late Friday. One euro was buying $1.3183 vs. $1.3115 previously.