Gold Prices Close Flat

NEW YORK (TheStreet ) -- Gold prices took a breather Friday as bargain hunters battled with profit takers and volume thinned.

Gold prices for December settled down 10 cents to $1,216.60 an ounce at the Comex division of the New York Mercantile Exchange. The gold price today has traded as high as $1,219.80 and as low as $1,212.30. The U.S. dollar index was adding 0.26% to $82.83 while the euro was losing 0.38% to $1.27 vs. the dollar. The spot gold price Friday was up 90 cents, according to Kitco's gold index.

Gold investors sat on the sidelines Friday after the previous day's $17 rally. Continuing weak job growth in the U.S., mixed growth in the Eurozone as well as comments from the European Central Bank that EU growth will be subdued for the next two years are still long-term fundamental supportive factors for gold.

Stocks have taken a beating this week with the Dow Jones Industrial Average slipping into negative territory for the year while gold prices rose 0.86% as investors opted for the precious metal over stocks. The popular gold ETF SPDR Gold Shares(GLD) added almost 4 tons this week.

Investors buy gold during times of economic uncertainty as a place to preserve wealth until equities recover. The U.S. dollar and yen have also been targeted as safe havens. The yield on the 10-year U.S. Treasury bond was at 2.70%.

Gold prices have conquered the $1,200 resistance area and are now targeting the $1,230 level. This rally might change the gold game if prices can "overcome resistance at $1,233, $1,235 area," says Jon Nadler, senior analyst at Kitco.com.

A stronger dollar, however, could drag on gold prices as investors dump the euro for a "safer" currency. A stronger dollar makes gold, a dollar-backed commodity, more expensive to buy in other currencies. Gold and the U.S. dollar buck this inverse correlation during times of major market panic, but any substantial rise in the dollar could curb enthusiasm for gold.

Video: What Will Hurt Gold's Rally >>

Another triple-digit stock market loss could also hurt gold in the short term as investors will be forced to sell gold to raise cash to cover losses. Nadler says "margin call liquidations ... could have investors reaching for gold." Gold prices are expected to stay in a tight trading range as profit takers battle with panicked investors until physical gold buying jump starts in September.

Friday's low inflation reading in the U.S. also leaves gold without a traditional catalyst. The core consumer price index rose just 0.1% in July, which squashs any inflation worries. Those investors who were buying gold as an inflation hedge will have no motivation to add to those positions.

Silver prices settled up 4 cents at $18.10 while copper closed down 3 cents to $3.25.

Gold mining stocks, an alternative way to invest in gold, were modestly lower. Yamana Gold(AUY) was down 1.36% to $9.76 while Freeport McMoRan Copper & Gold(FCX) was flat at $70.22. Other large gold stocks AngloGold Ashanti(AU) and Kinross Gold(KGC) were trading lower at $42.80 and $15.20, respectively.

--Written by Alix Steel in New York.

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