Gold Prices Settle Down, Lack Direction

NEW YORK (TheStreet ) -- Gold prices lost momentum Friday as risk appetite slowly improved and investors opted for stocks over gold futures.

Gold for December delivery settled $4.40 lower to $1,246.50 an ounce at the Comex division of the New York Mercantile Exchange. The gold price traded as high as $1,253 and as low as $1,237.90 on Friday. The U.S. dollar index was flat at $82.65 while the euro was at $1.27 vs. the dollar. The spot gold price was reversing earlier gains and was up 70 cents, according to Kitco's gold index.

The buying interest in gold was lackluster as investors shrugged off European sovereign debt worries and focused on positive data out of the U.S. and Asia as well as Basel III.

Officials from 27 countries will be meeting Sunday in Basel, Switzerland, to discuss the details of Basel III, which in essence will require banks to hold more capital to better protect themselves against another financial crisis. Big banks might be forced to raise more money than smaller ones. According to reports, this will impact banks in the U.S. less like Bank of America(BAC) and JPMorgan(JPM) as they have already been raising cash.

European banks, however, are now in the spotlight again. Germany announced earlier this week that 10 of its biggest banks will need to increase liquidity and Deutsche Bank(DB) is reportedly in the works to raise €9 billion through a share offering in order to start meeting requirements.

The meeting comes as markets started to panic this week that eurozone banks were saddled with more destructive sovereign debt than previously thought, but the stricter rules are helping to reassure investors. Traders were also ignoring gold on the news that China's imports surged in August, U.S. wholesale inventories popped in July and that Japan's economy grew at a faster pace than expected.

Gold prices pretty much hung around the $1,250 area on Friday, and despite recent record close, the metal has yet to surpass its intraday high of $1,266 an ounce. Some analysts are pessimistic in gold's ability to do so in the short term.

Jon Nadler, senior analyst at Kitco.com, believes that a lack of crisis and profit-taking could push gold prices lower. "I think that $1,245 really needs to hold ... absent that we could revisit $1,200 actually." Nadler says that if another currency or sovereign debt crisis materializes, however, gold could quickly reverse directions.