Gold Price Falls as Dollar Rises

NEW YORK (TheStreet) -- Gold prices broke $1,100 an ounce Thursday, after President Obama vowed to shake up Wall Street with strict limits on bank's trading activity.

Gold for February delivery was sinking $8.20 to $1,104.40 an ounce at the Comex division of the New York Mercantile Exchange. Prices have traded as high as $1,117.40 and as low as $1,088 as gold continued its steep decline from Wednesday when it shed $27. The U.S. dollar index was rising earlier in trading as the euro struggled on European debt fears and financial instability from Greece. However, the index slipped 0.20% after Obama's speech to $78.20.

A rising U.S. dollar makes dollar-based commodities like gold more expensive to buy in other currencies, often creating the inverse correlation between prices and the dollar.

Also contributing to gold's slide was increased worries over Chinese credit tightening. The country announced that fourth-quarter GDP soared to 10.7% and consumer prices rose 1.9% in December. China has already ordered its banks to curb lending, but these inflationary figures could put more pressure on the country to restrict lending. An end to free money from China, which has stimulated the global economy, will continue to curb investor interest in purchasing gold as an alternative asset.

"The psychology is shifting here [and] attempts toward the $1,075, $1,080 area appear to be in the cards," says Jon Nadler, senior analyst at Kitco.com. "The dominant theme emerging here ...[is] curbing your speculative enthusiasm."

Popular Platinum and Palladium ETFs

ETF flows indicate that gold is out of favor as investors turn their speculation appetite toward platinum and palladium. The popular gold ETF, SPDR Gold Shares(GLD), has shed almost 17 tons since the beginning of the year.

"Speculators are going where they still see potential upside and getting out of things where they see upside as limited," says Nadler. "White is the new black for 2010."