Gold Slides as the Dollar Lifts

Gold slipped again Wednesday as the dollar strengthened and fund managers took profits.

Prices for December-dated contracts closed down $1.50 at $623.80 an ounce on the Comex division of the Nymex, having partially recovered from an intraday low of $616. The exchange-traded funds were moving ahead, however, with shares of streetTracks Gold Shares and iShares Comex Gold Trust(IAU) both up about 0.3% in recent trading.

A strengthening dollar was putting downward pressure on futures prices. The greenback was buying 118.06 yen up from 117.51 yen late Tuesday. It was also gaining on the euro, trading at $1.2806 vs. $1.2822 previously.

Despite the fall, some observers note that there was plenty of two-way action during the session.

Selling by funds taking profits after the recent rally was being balanced by physical buying in Europe ahead of the Christmas shopping season, as well as some fabrication demand in India, says James Moore, a precious metals analyst at TheBullionDesk.com in London. "Unless we see a massive move in the dollar or oil the price [of gold] should trade in the range $613 to $628 for a while," he adds.

Looking longer term, President Bush's meeting Tuesday with Detroit's automakers GM(GM), Ford Motor(F) and Daimler Chrysler(DCX) resulted in discussions of international trade and foreign exchange rates, which has some bullion dealers excited.

"Combine the chatter about forcing a yen revaluation and persuading China to revalue the yuan,... and we've got a situation shaping up that could potentially devalue the dollar in short order," notes Neal Ryan, director of economic research at New Orleans-based coin dealer Blanchard.