Gold Prices Fight for Momentum

NEW YORK (TheStreet) -- Gold prices were fighting to find their footing Tuesday after plummeting 6% in January.

Gold for April delivery closed up $5.80 to $1,340.30 an ounce at the Comex division of the New York Mercantile Exchange. The gold price today has traded as high as $1,344.10 and as low as $1,326. The spot gold price was up $4.50, according to Kitco's gold index.

Gold prices had been trading higher earlier in the session but were knocked back after the U.S. reported stronger-than-expected manufacturing activity for December, indicating that the recovery is gaining steam. The Dow Jones Industrial Average was up triple digits as investors led a charge into stocks despite continued unrest in Egypt.

Gold prices managed to rally into the close as "lots of put buyers and call sellers and buyers were looking to protect positions today on the Comex," said George Gero, senior vice president at RBC Capital Markets.

The U.S. dollar index was sliding 0.88% to $77.05 while the euro was up 0.92% to $1.38 versus the dollar. All currencies were beating back the dollar Tuesday, which was helping gold find some support.

For a newbie gold investor, January's selloff can look dramatic. Gold rallied 26% in 2010 to then lose more than $100 from its record high. The SPDR Gold Shares (GLD) dropped 53 tons as tactical investors dumped gold. However, short interest on the stock is 4.7%, signaling that perhaps investor sentiment is turning.

ETF Securities also reported that its new gold backed ETF, ETFS Physical Asian Gold (SGOL), saw an inflow of 5,000 ounces Monday. Since launching on January 14th, about 40,000 ounces have been accumulated.

Traders are still on the fence as to how to play the gold market.

"I am going to look at the low from last Thursday, which is $1,308, and Monday's low of $1,322," says Scott Redler, chief strategic officer for T3Live.com, to determine when to start buying the GLD again. If the political unrest in Egypt spreads, Redler thinks gold prices could make another leg higher feeding off of the chaos.

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