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TheStreet Open House

Gold Prices Close Flat as Investors Take Profits

Stocks in this article: AUYKGCAEMEGO

NEW YORK ( TheStreet ) -- Investors took modest profits in gold Friday after the metal popped almost 8% in the past week.

Gold for December delivery closed down 50 cents to settle at $1,747.20 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,754 and as low as $1,733, while the spot gold price was down $1.10, according to Kitco's gold index.

Silver prices settled up 17 cents at $35.28 an ounce. The U.S. dollar index was flat at $75.04.

"Anything less than a 0.5% move can be chalked up to normal market activity," said Oliver Pursche, co-portfolio manager of the GMG Defensive Beta Fund. Gold, for the most part, has been moving in tandem with stocks with both assets lower on profit-taking Friday.

The S&P 500 is on track for its best monthly gain since 1974 and investors have less need to dump gold to raise cash. On a fundamental basis, the concern that Europe's grand plan to save the region from its debt crisis is short on details also spurred safe-haven buying into gold.

India's festival of lights, which typically ignites gold jewelry buying, is also contributing to gold's recent rally, says David Morgan, founder of Silver-Investor.com. "I'd say probably about half or so could be physical demand." Morgan thinks the market will lose some of that support as India's Diwali season comes to an end but that preparation for the holiday season in the U.S. might help prop up prices.

Some experts are also worried that leveraging the bailout fund to €1 trillion still isn't enough to prevent the debt crisis from spreading and that the European Central Bank will be forced to pump more money into the system to save the economy.

"Gold is still going to be treated as an alternative currency," said David Banister, chief investment strategist at TheMarketTrendForecast.com, "and its unlikely to see more downside from here."

Banister previously said that gold would rally to $1,705-$1,725 then suffer a seven-to-eight month correction before regrouping in April 2012 to mount another big rally to $2,360 an ounce. He has now revised his forecast.

"I think what we will see near-term is a rally up in the $1,775 level, a little bit of consolidation and then we move up into the $1,800s," he said. Banister still stands behind his $2,360 an ounce long-term price target. "There's absolutely a big debt problem that is not resolved overseas in Europe ... you really can't put out a fire with more paper ... but eventually this is going to flame back up again come early spring late winter."

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