Anxious Investors Mean Jumpy Gold Prices

NEW YORK (TheStreet ) -- Gold prices were volatile Wednesday as strong physical demand battled with technical trading.

Gold for December delivery closed up $25.60 at $1,641.60 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,636.50 and as low as $1,596.60 an ounce, while the spot gold price was adding $15, according to Kitco's gold index.

Silver prices settled 51 cents higher at $30.35 an ounce while the U.S. dollar index was flat at $79.06.

"Traders are running the market," said Tim Harvey, senior vice president at ETF Securities. Harvey said it's really a tale of two gold markets. On the one hand, there is very strong physical buying in Asia. But on the other hand you have transient "paper traders" or futures investors who sell gold for cash to book profits but can also buy as protection along with stocks.

"The paper marketplace has more importance in the short-term," said Mark O'Byrne, executive director at GoldCore, a bullion dealer. It will "take time for the people on the Comex to start coming in on the long side again," which they will be reluctant to do until gold closes higher for a week.

For now, gold prices seem to be moving with the stock market as margin calls force liquidation while risky stock buying comes hand in hand with buying gold as protection.

"Short-term anything can happen and the trend is down," said Byrne, but "medium- to long-term the trend still looks really good."

Scott Redler, chief strategic officer at T3Live.com, is watching gold's trading range very carefully. "There are a lot of forces of work ...there is a new range that traders are working against we broke that $1,800 and now we're hovering over $1,600."

Redler said traders are wondering if gold's pullback was really enough.

"We still think $1,575 support and $1,650 resistance," said George Gero, senior vice president at RBC Capital Markets, "but if we see a $1,675 close that could be a new technical breakout."

The big wild card for gold is Friday's jobs number. The ADP employment report for September showed that the private sector added 91,000 jobs, which was better-than-expected, but the Challenger layoffs survey showed the highest planned job cuts for a month since April 2009 at 115,730.