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Gold Prices Settle Down, Lack Direction

Gold prices were mixed Friday as investors sold gold futures contracts but bought the physical metal.
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Gold prices

lost momentum Friday as risk appetite slowly improved and investors opted for stocks over gold futures.

Gold for December delivery settled $4.40 lower to $1,246.50 an ounce at the Comex division of the New York Mercantile Exchange. The gold price traded as high as $1,253 and as low as $1,237.90 on Friday. The

U.S. dollar index

was flat at $82.65 while the euro was at $1.27 vs. the dollar. The spot gold price was reversing earlier gains and was up 70 cents, according to Kitco's gold index.

The buying interest in gold was lackluster as investors shrugged off European sovereign debt worries and focused on positive data out of the U.S. and Asia as well as Basel III.

Officials from 27 countries will be meeting Sunday in Basel, Switzerland, to discuss the details of Basel III, which in essence will require banks to hold more capital to better protect themselves against another financial crisis. Big banks might be forced to raise more money than smaller ones. According to reports, this will impact banks in the U.S. less like

Bank of America

(BAC) - Get Bank of America Corp Report



(JPM) - Get JPMorgan Chase & Co. Report

as they have already been raising cash.

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European banks, however, are now in the spotlight again. Germany announced earlier this week that 10 of its biggest banks will need to increase liquidity and

Deutsche Bank

(DB) - Get Deutsche Bank AG Report

is reportedly in the works to raise €9 billion through a share offering in order to start meeting requirements.

The meeting comes as markets started to panic this week that eurozone banks were saddled with more destructive sovereign debt than previously thought, but the stricter rules are helping to reassure investors. Traders were also ignoring gold on the news that China's imports surged in August, U.S. wholesale inventories popped in July and that Japan's economy grew at a faster pace than expected.

Gold prices pretty much hung around the $1,250 area on Friday, and despite recent record close, the metal has yet to surpass its intraday high of $1,266 an ounce. Some analysts are pessimistic in gold's ability to do so in the short term.

Jon Nadler, senior analyst at, believes that a lack of crisis and profit-taking could push gold prices lower. "I think that $1,245 really needs to hold ... absent that we could revisit $1,200 actually." Nadler says that if another currency or sovereign debt crisis materializes, however, gold could quickly reverse directions.

"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) - Get Sprott Physical Gold Trust Units Report

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

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Gold mining stocks

, a risky but potentially profitable way to

buy gold

, were mostly higher.

Freeport McMoRan Copper & Gold

(FCX) - Get Freeport-McMoRan, Inc. Report

was up 1.25% to $79.14 while

Kinross Gold

(KGC) - Get Kinross Gold Corporation Report

was adding 1.74% to $16.95. Other gold stocks

New Gold

(NGD) - Get New Gold Inc. Report


Gold Fields

(GFI) - Get Gold Fields Ltd. Report

were trading at $6.24 and $14.68, respectively.


Written by Alix Steel in New York.

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Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.