Gold Prices Again Creep Higher

The Chicago Board Options Exchange Gold Index was down only 0.3%.

Turning to base metals, copper was moving ahead. March-dated contracts closed up 2.8 cents at $2.556 a pound on the Comex, with traders citing short-covering as the key driver. Some say that the current rally could have legs if China returns to the market.

"The situation hinges on resolution of real Chinese consumption," says Dr. Mo Ahmadzadeh, president of Mitsui Bussan Commodities in New York. He explains that inventory drawdowns have led to lower levels of "apparent" demand for copper than would be observed otherwise.

"You would think that the de-stocking could not persist," says Ahmadzadeh, who believes buying by the communist giant could spur a 10-cent-a-pound spike in copper.

A rally would likely come as welcome relief to producers who have watched cash prices decline from a high of near $4 a pound in mid-May last year.

Shares of miner Phelps Dodge(PD Quote) were losing 0.1% in recent action, in line with the pullback of the broader indices. The Dow Jones Industrial Average closed down 0.06% at 12,416.60.