) --

Gold prices

were flat Monday on U.S. dollar volatility and technical trading.

Gold for December delivery settled up 10 cents to $1,372.10 an ounce at the Comex division of the New York Mercantile Exchange. The gold price traded as high as $1,373.60 and as low as $1,353.20 during Monday's session.


U.S. dollar index

was losing 0.11% to $76.95 while the euro was flat at $1.39 vs. the dollar. The spot gold price was adding $3.20, according to Kitco's gold index.

Gold prices pared earlier losses as bargain hunters bought gold on Monday morning's minor selloff. Gold prices have rallied 22.4% year to date and 9% since September, as investors piled into the precious metal as protection against a weaker U.S. dollar and volatile global currencies.

The massive rally can spark intermittent profit-taking and recently gold has also been coming under some pressure as worries that the

Federal Reserve

might print less money and buy less government debt than previously expected triggered a U.S. dollar rally.

"The dollar looks set to provide further direction in the coming sessions as players speculate over the Fed's QE measures," says James Moore, analyst at

. "However, gold should remain underpinned by dip-buying interest from the physical and investment sector."

The popular gold exchange-traded fund,

SPDR Gold Shares

(GLD) - Get Report

, added 14.59 tons just in the past week as gold hit a new intraday high of $1,388 an ounce. Many analysts, however, expect the gold price to remain in a holding pattern and inversely track until there is more clarity on how big this next round of quantitative easing from the Fed will be.

"I think a lot of that is already priced into the market," argues David Morgan, founder of

. "So we're kind of at a standstill in my view ... when in doubt stay out

of the market." Morgan is currently flat on his short-term gold trades. "If you have a big win ... you might consider buying some puts to protect those gains."

One bullish factor waiting in the wings for gold prices was a statement by Kim Choong-soo, head of South Korea's central bank, that the country might be interested in adding to its gold reserves. The

Financial Times

reported that the country would consider accumulating more gold to diversify its portfolio, which is heavily weighted in U.S. dollars.

According to the World Gold Council, South Korea holds 14.4 tons of gold in its reserves, only about 0.2% compared with the U.S., which holds 72.8% of its holdings in the precious metal. South Korea would be the latest country adding to its gold reserves, a trend that has supported a higher gold price since early 2009.

"There has been a fundamental shift in the behavior of central banks," says Natalie Dempster, head of investment for the World Gold Council. "Central banks on the whole have been net sellers of gold for the past two decades."

Since the second quarter of 2009, however, central banks from emerging market countries have transitioned into net buyers. The

Reserve Bank of India has been actively buying gold from the International Monetary Fund

. India now holds 7.5% in gold reserves, which is still considerably lower than the 20% of gold reserves it held in 1994.

One of the biggest buyers is China. Over the past five years, the country secretly increased its gold holdings from 600 tons to 1,054 tons. China currently holds only 1.6% of its reserves in gold. Dempster says that if China was to reallocate its holdings to 3% it would need to buy 1,000 tons of gold. China said back in March that it would not be looking to add more gold to its portfolio as it would affect the price too much, but the country is encouraging its citizens to buy gold.

"Some banks like India, says Dempster, "have been rebalancing as the percentage of gold in total reserves has fallen over time. Others are looking to diversify away from dollar-based assets, and with sovereign debt concerns continuing to grow around the world, gold's attractiveness as a reserve asset that bears no credit risk continues to grow."

Central banks, in general, regard reserve allocation as an ongoing government policy. 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 gold reserves are too low when compared to its other holdings.

Silver prices

settled up 12 cents to $24.41 while copper closed 1 cent higher at $3.85.

Video: 3 Reasons for High Silver Prices >>

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Gold mining stocks

, a risky but profitable way to

buy gold

, were mostly lower.

Freeport McMoRan Copper

(FCX) - Get Report

was down 1.57% to $96.51while

Eldorado Gold

(EGO) - Get Report

was losing 1.15% to $17.99. Other gold stocks

New Gold

(NGD) - Get Report


Gold Fields

(GFI) - Get Report

were trading at $7.02 and $15.70, respectively.


Written by Alix Steel in New York.

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