Gold Prices Close a Bit Higher

NEW YORK (TheStreet ) -- Gold prices were volatile Monday as investors waffled between risky stocks and safer gold.

Gold for October delivery settled up $1.50 to $1,185.40 an ounce at the Comex division of the New York Mercantile Exchange. The gold price Monday has traded as high as $1,193.90 and as low as $1,176.70. The U.S. dollar index was slipping 0.78% to $80.90 while the euro rallied to $1.31 vs. the dollar. The gold spot price was adding more than $1, according to Kitco's gold index.

Investors vacilated between gold and stocks Monday as the trading mood turned bullish. Earlier in trading gold prices popped past $1,190 an ounce on bargain-hunting and technical buying, but gold flat-lined midday as the Dow Jones Industrial Average soared by triple digits.

U.S. stocks were following upbeat European markets as the eurozone's manufacturing purchasing managers index for July rose to 56.7, which was better than expected. The U.S. also delivered better manufacturing activity for July of 55.5; any number over 50 signals growth.

The strong numbers offset news from China that its manufacturing activity slowed moderately in July to the lowest level in 17 months.

Investors seized upon the good news to pile into stocks and leave their gold positions relatively untouched.

Gold prices are stuck in a tight trading range, and most analysts anticipate more of the same for the rest of the summer. On the one hand, better-than-expected corporate earnings and economic data are pushing investors to dump gold for stocks. Encouraging signs of a global economic recovery decrease gold's appeal as a safe-haven asset.

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James Moore, senior analyst at thebulliondesk.com, in his daily metals report predicts "gold ... may be vulnerable to further long liquidation as investor switch to riskier assets."

On the flip side, any discouraging data like the manufacturing report out of China could prompt another flight to safety. Although panic buying seems to have subsided for now, investors' long-term love for gold as a safe place to put their wealth is helping to support four-digit gold prices. The popular gold exchange-traded fund, SPDR Gold Shares(GLD), lost almost 20 tons last week as investors lost interest in the metal, but tonnage still remains at 1,282 well above pre-crisis levels. Some analysts speculate that lower gold prices might also trigger physical buying in China and India, typically price sensitive markets, as bargain hunters seek to buy gold at "discount" prices.

A weaker U.S. dollar is also supporting gold prices as the dollar-backed commodity becomes cheaper to buy in other currencies.

Silver prices popped 41 cents to $18.41 while copper settled 7 cents higher at $3.38. Recent bullish sentiment is a positive for base metals, which are used in industrial and construction use and heavily correlated to a global economic recovery. Investors still attracted to metals might be tempted to switch out of gold and into silver and/or copper .