Gold was caught in an economic tug-of-war Tuesday, with traders weighing a dipping oil price against higher inflation figures out of the U.K., leading to a choppy session.

February-dated contracts lost a dollar to close at $625.90 an ounce on the Comex division of the New York Mercantile Exchange. The bullion exchange-traded funds, streetTracks Gold Shares ( GLD) and iShares Comex Gold Trust ( IAU), were moving down, off 0.1% recently.

Saudi oil chief Ali Naimi indicated production cuts by OPEC might not be necessary, thus leading to a softer price for crude. Oil dropped $1.78 to $51.21 a barrel. That news provided support for the bear case.

Energy costs are a key component in inflation, and when they fall, the risk of rising prices is mitigated. Gold is bought by some investors as a hedge against inflation.

At the same time, even though reduced energy costs may mean lower inflation going forward, prices were rising their fastest in more than a decade in Britain, with the consumer price index hitting 3% growth in December. Because the advance was well above the Bank of England's target rate of 2%, it was making a bullish case for gold.

"The recent 3% level recorded in Britain means that it takes only about a decade to melt away a third of one's wealth," writes Jon Nadler, an analyst at Montreal-based bullion dealer Kitco, in a research report.

The greenback, which tends to move in the opposite direction to gold prices, was providing a modest pointer for bullion traders. One dollar would recently buy 120.6 yen, up from 120.45 late Monday. One euro would purchase $1.292, down marginally from $1.2937 previously.

Turning to the official sector, the European Central Bank said it sold 28 million euros of gold and receivables, or about 1.9 tons, last week.

Meanwhile, the U.S. Mint says that full-year sales of its 24 karat (99.99% pure) one-ounce buffalo coins outstripped those of the more established 22 karat (91.7% pure) eagles for 2006. Dealers snapped up 323,000 buffalos, which only went on sale at the end of June, compared to 261,000 ounces of gold eagles. But the tide may be turning for the eagle. By mid-January the Mint says it sold 9,000 buffalos and 24,000 ounces of eagles.

In the precious metals patch, CIBC World Markets dinged silver producer Coeur d'Alene Mines ( CDE) down to a rating of sector-perform from sector outperform. Silver closed at $12.68 an ounce, down 26 cents, while Coeur was losing 2.7% recently.

Freeport-McMoRan Copper & Gold ( FCX) reported lighter-than-expected fourth-quarter earnings of $1.99 a share, below the consensus forecast of $2.12 and down from $2.19 a year before. The company cited lower volumes of metal sold.

The stock was off 3% recently.

As for base metals, March-dated copper contracts closed down 3 cents at $2.58 a pound.

"Copper continues to look weak," notes Tobin Gorey, an analyst at Commonwealth Bank of Australia in Sydney. Prices "are still at a level that will encourage further production, so there's little to argue with in terms of direction for now," meaning that additional supply can be expected to hit the market, continuing to soften prices.

Shares of diversified miner Rio Tinto ( RTP) were losing 2.4% recently.

More from Commodities

Watch This If You're Wondering How Much Gold to Have and When to Sell

Watch This If You're Wondering How Much Gold to Have and When to Sell

How Can Gold Continue This Upward Momentum?

How Can Gold Continue This Upward Momentum?

Week Ahead: Investors Keep Economy in Check as Trade, North Korea Talks in Limbo

Week Ahead: Investors Keep Economy in Check as Trade, North Korea Talks in Limbo

Oil Rally Steadies Even as Potential Supply Disruptions Persist

Oil Rally Steadies Even as Potential Supply Disruptions Persist

The Outlook for Gold Prices Looks Awful Even With 10-Year Yields Above 3%

The Outlook for Gold Prices Looks Awful Even With 10-Year Yields Above 3%