Gold Prices Settle Low Amid Profit-Taking - TheStreet

Gold Prices Settle Low Amid Profit-Taking

Gold prices closed lower Thursday as investors' risk appetite improved and traders sold gold for stocks.
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NEW YORK (

TheStreet

) --

Gold prices

slipped Thursday as investors sold gold for equities and continued to take profits after

gold's record high

.

Gold for August delivery settled down $7.70 to $1,222.20 an ounce at the Comex division of the New York Mercantile Exchange. The gold price Thursday traded as high as $1,236 and as low as $1,216.20. The

U.S. dollar index

was losing 0.87% to $87.12. The

euro was rallying 0.88%

to $1.209 against the dollar after European Central Bank President Jean-Claude Trichet threw his support behind the euro saying it was a "credible currency." The spot gold price Thursday was down more than $14, according to Kitco's gold index.

Gold prices struggled to regain their upward momentum as general risk appetite improved and traders opted for stocks vs. the safety of gold. China's exports rose 48.5% in May which indicated that China's economy was not slowing, as many had feared. This news pared with

comments from Federal Reserve Chairman Ben Bernanke

that the U.S. economy is on track for recovery and would grow 3.5% in 2010 helped calmed jittery investors.

Bernanke also said to the House Budget Committee that "support to economic growth from fiscal policy is likely to diminish in the coming year." This statement could mean that the Fed will start raising key interest rates to ward off any inflation from stimulus sooner rather than later. Many investors had been buying gold as a hedge against inflation and traders might be looking to shift their gold positions.

How China Will Affect Gold Prices

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According to George Gero, vice president of global futures at RBC Capital Markets, gold prices "held up well ... in face of triple digit stock rally." For the long term, many analysts believe that negative headline news from the

BP oil spill

and Europe's debt crisis will continue to drive prices higher. "I think the concerns about European banks and the peripheral European economies ... are going to remain with us for some time," says Nicholas Brooks, head of research and investment strategy for ETF Securities.

"Therefore, I think European investors in particular are going to look at gold as an alternative store value of currency. Therefore, I think it's very possible for the gold price to continue to move higher." Gold prices, meanwhile, will look to retest $1,200 as a support level while they wait for bargain-hunters.

Video: Mining Stocks to Watch >>

JPMorgan

, however, is more cautious on gold than Brooks and Gero. In a research note, analyst John Bridges said that gold prices had a 25% possibility of hitting $1,500 in the short term but over the long term prices would trend around $950 an ounce. Bridges upgraded most major mining companies like

Agnico Eagle

>

(AEM) - Get Report

,

Goldcorp

>

(GG)

and

Barrick Gold

>

(ABX)

and, despite the $950 price target, issued a tentative buy rating on gold.

"It's difficult to buy gold after its strength and close to record highs. However, we feel it's more difficult

not

to have a gold position in these highly uncertain times."

Silver prices

settled 16 cents higher to $18.35 while copper closed up 1 cent at $2.86.

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Gold mining stocks, a more risky and more profitable way

to invest in gold

, were mixed.

Eldorado Gold

(EGO) - Get Report

was 1.50% lower to $17.02 while

Silver Standard Resources

(SSRI)

was rising almost 2.50% to $18.39. The popular gold ETF

SPDR Gold Shares

(GLD) - Get Report

was sinking more than 1% to $119.23 while

Market Vectors Gold Miners ETF

(GDX) - Get Report

was adding 0.50% to $50.45.

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--

Written by Alix Steel in New York

.

Alix joined TheStreet.com TV in February 2007. Previously, she held positions in film and theater production, management, and legal administration. Alix has a degree in communications and theater from Northwestern University.