Gold Prices Settle Down, Lack Direction

"The upside, of course, first remains a question of overcoming the $1,265 and if our early forecast [for the] year of about $1,280 ... is met we could actually overshoot by another $40-$50."

In other gold news, the International Monetary Fund announced a 10 ton sale of gold to Bangladesh. The IMF has been trying to unload 403.3 tons of gold since last September and currently has about 181 tons remaining. There are some rumors however that funds like Sprott Asset Management were lobbying the IMF for its gold for its redeemable gold fund Sprott Physical Gold Trust(PHYS) but were denied.

India bought 200 tons of gold from the IMF in November 2009 at then record high gold prices of $1,045 an ounce for a total of $6.7 billion.

Central banks in general have been transitioning into net buyers of gold rather than net sellers. Although the governments consider fundamentals like dollar weakness and the sustainability of gold as money, they don't trade gold, they buy it as an investment. They will buy gold when they feel its gold reserves are too low when compared to its other holdings. Central banks tend to be price agnostic and are heavy buyers.

Silver prices closed down 1 cent to $19.84 while copper settled 3 cents lowerat $3.40

Gold mining stocks, a risky but potentially profitable way to buy gold, were mostly higher. Freeport McMoRan Copper & Gold(FCX) was up 1.25% to $79.14 while Kinross Gold(KGC) was adding 1.74% to $16.95. Other gold stocks New Gold(NGD) and Gold Fields(GFI) were trading at $6.24 and $14.68, respectively.

--Written by Alix Steel in New York.

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