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Gold prices

tried to recover after a late-day selloff Wednesday triggered by technical trading and U.S. dollar strength.

Gold for December delivery closed down 80 cents at $1,617.30 an ounce at the Comex division of the New York Mercantile Exchange. The

gold price

has traded as high as $1,637.90 and as low as $1,585 an ounce, while the spot gold price was up $2.60, according to Kitco's gold index.

Silver prices

settled up 38 cents at $30.52 an ounce while the

U.S. dollar index

was down 0.20% at $77.93.

Gold prices stabilized as the German Parliament approved expanding the Eurozone bailout fund to 440 billion euros. The euro saw a relief rally against the dollar on the vote, which helped gold find its footing.

Vote: Where will gold prices finish in 2011?

Uncertainty is far from over as 7 countries still need to ratify the change and as most experts now say the expanded fund isn't enough to help backstop the debt crisis sweeping through the European Union. Talks about increasing the firepower of the fund have been met with a resistance from Germany, which is not willing to put its triple A credit rating at risk by using leverage or funneling more money into the fund.

Gold's future, like Europe, is uncertain. Any major disaster like a Greek default or a bank failure could trigger a rush to safety into gold but would also boost the dollar against the euro, which could weigh on the dollar-backed commodity. Gold has also been used as a prime liquidation tool when investors need to raise cash to cover losses elsewhere. If stocks deteriorate, then gold could sell off further.

On the flip side, any strong action from the EU would likely cheer investors and lead them into stocks and make them forget about gold altogether.

Gold is "bewildering in the short term," says Oliver Pursche, co-portfolio manager of the GMG Defensive Beta who argues "gold is much more attractive than it's been in quite some time ... I wouldn't be shocked if you saw new highs before the end of the year."

Pursche says that gold is starting to reflect some fundamentals again like supply and demand issues rather than just panic buying. Pursche also thinks that global growth worries, particularly worries of a massive slowdown in China, are overdone.


's recent poll said that global investors see China's growth slowing to under 5% by 2016. "Raw data isn't indicating a horrific environment," argues Pursche who thinks that stronger than expected third quarter earnings, improving data and more good news rather than bad news out of Europe will boost stocks which would have a positive impact across the board including gold.

Gold got a short-lived bounce early Thursday after U.S. growth in the second quarter jumped to 1.3% from a previous 1% reading. Like Pursche predicted, all assets rallied, but gold was unable to hold on to those gains.

Commerzbank believes that gold prices will stabilize. "Strong physical demand is reported from Asia, which should prevent prices falling further."

The firm says that outflows from the physical backed ETFs recently have been meager compared to the gold price plummet. "In the past seven days, a total of just 19 tons flowed out of the major gold ETFs, equivalent to less than 1% of stocks."

ETF Securities, creator of

ETFS Physical Gold Shares

(SGOL) - Get Free Report

, echoed the sentiment. "We haven't really seen outflows," says Will Rhind, head of U.S. operations, "we haven't seen any inflows either so we are largely stable."

"When we look at that liquidation in gold I think all the signs seem to point to liquidation by the hedge funds, " says Rhind, "some of the faster money players who were liquidating primarily futures contracts." Rhind expects prices to continue to stabilize as physical buying picks up.

Gold mining stocks

had a volatile day of trading but were clawing higher.

Kinross Gold

(KGC) - Get Free Report

was up 1.32% to $14.55 while

Yamana Gold

(AUY) - Get Free Report

was adding 1.11% at $13.61. Other gold stocks,


(AEM) - Get Free Report


Eldorado Gold

(EGO) - Get Free Report

were trading higher at $60.70 and $17.16, respectively.

Related Articles:

How to Invest in Gold

Do Gold Prices Have Room to Rise?


Written by Alix Steel in

New York.

>To contact the writer of this article, click here:

Alix Steel


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