Gold Slides as the Dollar Lifts

Some traders take profits but others see hope for the metal in policy chatter out of Washington.
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Gold slipped again Wednesday as the dollar strengthened and fund managers took profits.

Prices for December-dated contracts closed down $1.50 at $623.80 an ounce on the Comex division of the Nymex, having partially recovered from an intraday low of $616. The exchange-traded funds were moving ahead, however, with shares of

streetTracks Gold Shares

(GLD) - Get Report

and

iShares Comex Gold Trust

(IAU) - Get Report

both up about 0.3% in recent trading.

A strengthening dollar was putting downward pressure on futures prices. The greenback was buying 118.06 yen up from 117.51 yen late Tuesday. It was also gaining on the euro, trading at $1.2806 vs. $1.2822 previously.

Despite the fall, some observers note that there was plenty of two-way action during the session.

Selling by funds taking profits after the recent rally was being balanced by physical buying in Europe ahead of the Christmas shopping season, as well as some fabrication demand in India, says James Moore, a precious metals analyst at

TheBullionDesk.com

in London. "Unless we see a massive move in the dollar or oil the price

of gold should trade in the range $613 to $628 for a while," he adds.

Looking longer term, President Bush's meeting Tuesday with Detroit's automakers

GM

(GM) - Get Report

,

Ford Motor

(F) - Get Report

and

Daimler Chrysler

(DCX)

resulted in discussions of international trade and foreign exchange rates, which has some bullion dealers excited.

"Combine the chatter about forcing a yen revaluation and persuading China to revalue the yuan,... and we've got a situation shaping up that could potentially devalue the dollar in short order," notes Neal Ryan, director of economic research at New Orleans-based coin dealer Blanchard.

Elsewhere, new data shows demand for gold slipped to 816.9 tons in the third quarter, down about 3% vs. the same period a year ago, according to provisional figures from The World Gold Council. In particular, gold buying by ETFs fell 49% to 19.2 tons, while jewelry demand also dropped to 592.1 tons, off 4%.

Among the miners, the

Amex Gold Bugs Index

was lifting about 0.4% in recent trading, but shares of

Goldcorp

(GG)

were off 0.3% after the company reported disappointing third-quarter earnings of 14 cents a share. The company earned 17 cents a share in the same period a year before.

Shares of industry stalwart

Newmont Mining

(NEM) - Get Report

were gaining about 1.9% lately.

In base metals, Comex December copper contracts closed up 0.55 cents at $3.0945 a pound, reversing earlier losses.

Shares of diversified miners

BHP

(BHP) - Get Report

and

Rio Tinto

(RTP)

were also losing, lower by 0.7% and 0.2%, respectively.

In ferrous metals, Matrix Research upgraded

U.S. Steel

(X) - Get Report

to a strong buy rating from a buy.

Elsewhere chart watchers are predicting a move to $80 for U.S. Steel shares which were trading around $68 recently, up 1.2%.

"The stock is above its upward sloping moving averages and momentum is improving and not close to overbought," says John Roque, a technical analyst at Natexis Bleichroeder.