Dollar Drives Down Gold Prices

Updates gold price reversal as dollar strengthens.

NEW YORK (TheStreet) -- Gold prices get pounded by a stronger U.S. dollar.

Gold continues to stay in a tight trading range as any U.S. dollar strength and subsequent weakness in gold prices is offset by bargain hunting. Investors seem torn between an optimistic global economic recovery, which would increase risk appetite for assets like gold, and pessimistic credit woes, which would buoy the U.S. dollar and pressure precious metal prices.

On Monday, bargain hunting initially supported gold prices in the $1,110 range as the U.S. dollar slipped .10%. But then the ">U.S. dollar index reversed rising .18$ to $77.92. Greece's recent credit downgrade has prompted investors to buy the U.S. dollar as a safe haven asset. "The U.S. dollar is really expected to extend its rally against the Euro and the Yen because there are still basic problems overseas" says Jon Nadler, senior analyst at Kitco.com.

Gold prices are expected to maintain their inverse relationship to the U.S. dollar and volatility will be high this week as volume stays light. "At the moment we have a range of support just under $1,100 with the upside being capped at $1,130 to $1,140. That's the channel we expect to trade in until at least some further data comes out this week."

Gold prices were shedding $9.50 to $1,102 an ounce at the Comex division of the New York Mercantile Exchange. Gold delivery for February, the most actively traded contract, has traded as high as $1,120.80 and as low as $1,101.

Silver prices were rising 10 cents in the beginning of the session but then lost 20 cents to $17.11. Copper was flat at $3.15.