NEW YORK ( TheStreet) -- Gold prices fizzled out Friday with trading influenced by a stronger dollar and profit-taking. Gold for December delivery lost $5.60 to $1,372 an ounce at the Comex division of the New York Mercantile Exchange. The metal traded as high as $1,386.40 and as low as $1,362.70 during Friday's session, but the price was falling double digits after the Comex closed. The U.S. dollar index was adding 0.65% to $77.04 while the euro was falling 0.88% to $1.39 vs. the dollar. The spot gold price Friday was falling $14.90, according to Kitco's gold index. Gold prices were retreating despite the fact that Federal Reserve Chairman Ben Bernanke in a speech Friday gave the green light for more monetary easing. Bernanke said inflation "can be too low" and that "overall economic growth is less vigorous than we would like," but investors didn't learn anything new and no dollar amount was put on any accommodative measures. Further supporting Bernanke's argument was the fact that the core Consumer Price Index for September was unchanged. Bernanke said that the Fed's next steps will be dictated by economic data and that a lack of inflation in September will certainly support the thesis that more money printing is needed. Bernanke did say that the Fed will proceed with caution, leaving some question marks about how much money the Fed will inject into the system. Bernanke also said the economy should grow more quickly in 2011, which in turn raised the question of how long the Fed's monetary easing will last. Bernanke said that the Fed is already outlining an exit strategy to put a cap on quantitative easing and to make sure that inflation doesn't surge out of control. His cautionary tone crimped gold's rally along with profit-taking as investors booked gains after gold's monster rally this week and on the heels of options expiration.
Henry Smyth, portfolio manager of Granville Cooper, thinks that's the wrong question to ask and the real question is "what is going to stop it?" Smyth thinks the only thing that can hamper gold's rally is the return of positive real interest rates. The real interest rate is calculated by subtracting the inflation rate from the interest rate. Currently rates are negative if you factor in 0% key interest rates and a 1.1% inflation rate, which most experts actually say is probably higher. If rates are negative, then the dollar is worth less. When the dollar is worth less, gold is worth more as a more stable form of currency. Smyth said he sees "no steps to reverse the long-term decline of the dollar" and with money printing a foregone conclusion now there doesn't seem to be anything fundamental to crimp gold's rise. Silver, prices settled down 14 cents to $24.28, while copper added 2 cents to $3.83. Gold mining stocks, a risky but potentially profitable way to buy gold, were mostly lower. Yamana Gold ( AUY) was down 2.76% to $11.29 while Freeport McMoRan Copper & Gold ( FCX) was 1.65% lower at $97.36. Other gold stocks New Gold ( NGD) and Gold Fields ( GFI) were trading at $7.09 and $15.62, respectively. -- Written by Alix Steel in New York. >To contact the writer of this article, click here: Alix Steel. >To follow the writer on Twitter, go to http://twitter.com/adsteel. >To submit a news tip, send an email to: firstname.lastname@example.org.
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