NEW YORK ( TheStreet ) -- Gold prices lost steam Wednesday as the U.S. dollar strengthened and investors took profits.

Gold for February delivery ended down $18.10 to $1,386.20 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,398 and as low as $1,383.70 during Wednesday's session.

The U.S. dollar index was adding 0.90% to $80.16 while the euro was down 1.12% at $1.32 vs. the dollar. The spot gold price Wednesday was losing $12.80, according to Kitco's gold index.

Gold prices were following their volatility pattern as any run above $1,400 is met with profit-taking, while any dips are met with "bargain-buying."

"Caution prevails in the metals markets," says George Gero, senior vice president at RBC Capital Markets. "I still see $1,370 as the support ... we've hit that several times in the recent sell-off and always bounced off that."

Gero sees $1,425 as the resistance area, although other analysts peg it as low as $1,416 an ounce. The expectation is that money managers will even out their gold positions headed into the end of the year and will perhaps buy back those positions in January.

The popular gold exchange-traded fund, SPDR Gold Shares ( GLD), has shed 7.1 tons since Dec. 1 as investors took advantage of the ETF's 24% rally this year.

Dip-buying, however, is helping gold stay afloat as those who don't own the metal seek selloffs to buy. The cheapest gold ETF, iShares Gold Trust ( IAU), added more than 8 tons on Tuesday. According to a report on Bloomberg, the number of shares held in the ETF jumped 7.6% on Monday, the most in four years, which forced iShares to buy more gold.

Gero still thinks prices will "level off and have a steady course for a while" and doesn't know when gold will make a real breakout run.

Prices are being pressured from rising rates and stronger dollar. The yield on the 10-year note rallied to 3.52% as investors ditched bonds on better than expected industrial and manufacturing data.

The government was forced to raise the yield to entice investors which strengthened interest rates and made the dollar more valuable. A stronger dollar provided some headwinds for gold as the dollar-backed commodity became more expensive to buy.

Gold on Wednesday shrugged off its role as a safe-haven asset in light of threats from Moody's that it might downgrade Spain's debt. The agency warned of a similar consequence to the U.S.'s rating on Tuesday.

Moody's is concerned about Spain's high financing requirements for 2011. For its part, the country tried to reassure investors that it doesn't need any financial aid.

Meantime, the U.S. core Consumer Price Index proved to be a mixed bag for gold. The reading for November was in line with expectations of 0.1%, which brought inflation to 0.6% vs. a year ago. Gold is attractive in times of inflation so the lackluster data put a crimp in gold's safe-haven appeal.

On the flip side, low inflation means that the Federal Reserve will likely make no changes to its $600 billion bond-buying program and gives more weight to some analysts' predictions that the Fed will have to pursue more rounds of quantitative easing to keep the economy going.

The Fed's low-end inflation target is 2%, compared with China, the fastest growing country in the world, which just raised its inflation target to 4%.

Daniel Wills, senior analyst at ETF Securities, says that near term inflation, led by the U.S., remains subdued but that price pressures in energy and food from emerging markets like China could color the worldwide inflation landscape over the long term. "This could spell higher inflation ahead."

Silver prices shed 53 cents to $29.25 while copper ended down 7 cents to $4.13. The industrial metals were suffering over worries that debt problems and austerity measures in EU countries might crimp spending. That struggle will take center stage Wednesday in Ireland as the Parliament passed approval for its bailout money from the International Monetary Fund and EU.

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Gold mining stocks, a risky but potentially profitable way to buy gold, were drifting lower. Yamana Gold ( AUY) was down 1.19% to $12.42 while Goldcorp ( GG) was 0.89% lower at $45.75. Other large gold stocks Agnico-Eagle ( AEM) and Eldorado Gold ( EGO) were trading at $80 and $17.97, respectively.


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-- Written by Alix Steel in New York.

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