Gold Prices Continue to Slide as Dollar Strengthens

NEW YORK (TheStreet ) -- Gold prices were sinking for a second trading day as the U.S. dollar popped and stock markets tanked.

Gold for December delivery was losing $13.90 at $1,711.30 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,725.60 and as low as $1,681.20 an ounce while the spot gold price was down $25, according to Kitco's gold index.

Silver prices were shedding 91 cents at $33.43 an ounce while the U.S. dollar index was jumping 1.07% at $77.32.

"Investors [were] again hit with multiple negative headlines," says George Gero, senior vice president at RBC Capital Markets. Gero said funds were using the headlines as a trigger to sell.

Although the impact of MFGlobal's(MF) bankruptcy was of little impact to traders at the Nymex, with the exception of light volume, traders did say that those affected would be forced to raise cash elsewhere while they waited for their money from the firm, which could pressure selling.

Vote: Where will gold prices finish in 2011?

Greece has also buried itself deeper in its debt debacle with Prime Minister George Papandreou announcing a public referendum on the second 130 billion euro bailout. The vote won't be held until January, which just clouds markets with more uncertainty.

Gold could benefit from safe-haven buying or panic buying, but it seems like liquidation is ruling the day as traders are forced to sell the asset, up 3.6% in October, to cover losses elsewhere. Traders also added almost 5,500 net long positions in the week ending October 25th and depending on what level they bought, might be under pressure to sell to lock in gains. "It just depends on what their threshold for pain is," says Anthony Neglia, founder of Tower Trading.

Neglia also names U.S. dollar strength as the big culprit in gold's selloff. "Gold is traded in many other currencies ... and the lower these currencies go the more expensive it is to hold gold so the less attractive it becomes. So unless we get a significant decline in the dollar, i.e. a rally in other currencies, I think gold is probably trapped for now."

"I sense that that the next several days could see more weakness," agrees Adrian Day, president of Adrian Day Asset Management. "I think all we are seeing right now on a short term basis ... [is that some investors] had another chance to sell,"

Many experts including Day are now looking towards the Federal Reserve's two-day FOMC meeting for direction. Although rates are expected to stay at zero until mid-2013, any change in language or an extension of low rates would underscore a more accommodative monetary policy.