Gold Price War Under Way

NEW YORK (TheStreet) -- Gold prices nose dive under $1,100 as gold's tug of war heats up.

Gold prices hit a 6 1/2 week low Monday to settle at $1,096 an ounce. A stronger U.S. dollar pressured metal prices down, but it's free fall was slowed by bargain hunters. The SPDR Gold Shares(GLD) added another 6 tons on Monday for a total of 12 in two trading days signaling that many traders were using pullbacks to buy gold. Volume is expected to be light for the rest of the shortened holiday trading week, but daily GLD share volume was over 20 million on Monday.

Gold found some support early Tuesday as investors jumped into more risky assets like equities and commodities on economic recovery hopes and improving home sales data. The final revision of third-quarter gross domestic product showed the nation's economy grew at a 2.2% annual rate which was less than anticipated while existing home sales soared 7.4% in November. The dollar slid and gold reversed some of its losses.

But any uptick in gold was short lived; gold prices are expected to keep plummeting until the end of the year. "I am looking at a $1,050 to $1,125 [range] for the next couple of weeks", says George Gero, vice president of global futures at RBC Capital Markets. "Longer term these large sell-offs represent buying opportunities but not in the short term." Currently the U.S. dollar index was rising.17% to $78.25 while gold prices were tumbling $16.10 to $1,079.90 an ounce at the Comex division of the New York Mercantile Exchange. Gold delivery for February, the most actively traded contract, has traded as low as $1,078 and as high as $1,098.20.

Silver prices were falling 16 cents to $16.87 while copper was giving up 4 cents to $3.11.

Mining stocks, a more leveraged way to invest in gold, were finding minimal support with broader equities. Barrick Gold(ABX) and Newmont Mining(NEM) were down 1% to $38.66 and $46.70 respectively. Shares of Freeport McMoRan Copper & Gold(FCX) were slightly higher at $78.03. IAMGOLD(IAG) was up 1% to $15.16 after receiving an upgrade from UBS to buy from neutral. The GLD was slipping slightly to $105.62 while the mining ETFs, Market Vectors Gold Miners(GDX) and Market Vectors Juniors(GDXJ) were trading at $44.92 and $24.41 respectively.

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