The U.S. dollar index was up 0.14% to $79.80 while the euro was down 0.15% to $1.32 vs. the dollar. The spot gold price was shedding more than $15, according to Kitco's gold index. Gold prices surrendered early gains after the metal hit an all-time high of $1,432.50 an ounce. Investors were looking to take profits instead of continuing the momentum rally in gold. Many analysts expect any price dip, however, to be met with buying as traders look to buy gold at a "discount." Gold's quick flip from a record rally Monday to finishing in the red Tuesday suggests that market participants are traders trying to make an easy profit with gold and are not buying the metal for the long term. "Every time we've seen a decline in prices, we've seen investors step in and use that as a buying opportunity," argues Rohit Savant, senior commodity analyst at CPM Group. "We can see prices dip to maybe $1,380-$1,360 on the downside and on the upside we will probably see prices rise maybe even towards $1,450," Savant said. Contributing to gold's decline was speculation that China might raise key interest rates as early as this weekend. The move has been widely anticipated after the country reported a 4.4% rise in its core Consumer Price Index in October vs. a year ago. The country has been taking steps to slow its growth by raising the amount of money that banks must hold in their reserves but they haven't been enough to cool growth. The worry is that a slowdown in China would severely crimp the country's demand for commodities, especially gold. China imported 209.7 metric tons in the first 10 months of 2010, which is 7.4 million ounces. For comparison, that figure exceeds the activity of the gold ETF, SPDR Gold Shares ( GLD), which added 164.36 tons, or 5.8 million ounces, in the same time period. Any substantial slowdown in purchasing power and gold demand would severely weigh on prices. On the flip side, helping to support higher gold prices were statements from Federal Reserve Chairman Ben Bernanke during an interview broadcast Sunday on CBS's "60 Minutes" that the Fed would consider expanding its quantitative easing program, which stoked inflation concerns. Late Monday President Obama agreed to congressional Republicans' wish to extend tax cuts implemented by the Bush administration for all income groups for two years. Those in favor of the tax cuts said canceling them would hurt the economy by discouraging consumer spending. The deal trims worker payroll taxes for one year, extends credits for small businesses and lengthens unemployment benefits. The news improved risk appetite as investors opted for stocks over gold.
"It remains to be seen whether these cuts will have the desired impact of stimulating the economy, but they most certainly will grow the deficit and weaken the dollar, and this is perhaps what is behind the sizable advance we