Gold Inches Lower

Updated from 11:32 a.m. EST

Gold fell Thursday amid choppy trading, with some observers seeing unstable conditions continuing for the foreseeable future.

December contracts closed off $2.10 at $621.70 an ounce, on the Comex division of the Nymex. The bullion exchange-traded funds were edging lower also, with streetTracks Gold Shares (GLD - Cramer's Take - Stockpickr) and iShares Comex Gold Trust(IAU - Cramer's Take - Stockpickr) each under by approximately 0.4%.

"In the near term there is uncertainty surrounding Iraq and the economy, which is positive for gold," says Carlos Sanchez, a metals market analyst at CPM Group, a New York-based specialty consulting firm. "Expect further volatility with an upward bias to prices."

Traders are currently rolling their positions forward in the futures markets from the December contract to those with a February date, Sanchez says. "That is having some depressing effect on near-term prices." But he adds that "what we see is a buildup of positions February which suggests prices have a way to go up."

Comex February-dated contracts closed off $2.10 at $627.90 an ounce, with open interest now about 9 million ounces, up from 8.7 million ounces earlier in the session. It compares to current outstanding positions of 15 million ounces for the December contract, down from 15.5 million in the morning. Gold watchers should expect the relative levels of the two to switch rapidly over the next two weeks.

Looking more broadly, many investors were focusing on new data from the U.S. Department of Labor, which reported that consumer prices fell 0.5% in October, compared to the forecasted 0.3% decline. The previous month also showed a decline of 0.5%. The core CPI figure, which excludes volatile food and energy costs, showed an increase of 0.1%. The consensus estimate was for a 0.2% gain.