NEW YORK ( TheStreet ) -- Gold prices were volatile again Thursday as investors battled with an on-again, off-again risk trade. Gold for February delivery ended up $1.20 to $1,387 an ounce at the Comex division of the New York Mercantile Exchange. The gold price traded as high as $1,392.90 and as low a $1,377.20 during Thursday's session. The U.S. dollar index was down 1.11% to $79.15 as the euro pushed higher, rising 1.85% to $1.33 vs. the dollar. The spot gold price Thursday was down $7.30, according to Kitco's gold index. Trading opened with the now typical no-love-for-gold theme but then rebounded as weak jobless claims led investors into the precious metal. The spike brought in profit takers but gold managed to end the day slightly higher. Despite their volatility, prices can't seem to break out of a tight range of late. Gold fell sharply in after-hours trading, however, losing more than $13, after Federal Reserve Chairman Ben Bernanke offered an upbeat assessment of the U.S. economy. Bernanke said the economy could grow 3%-4% in 2011 despite low unemployment. Gold reacted badly because a better economy would take QE3 -- yet another round of fiscal stimulus -- off the table and raises the possibility that the Fed could hike key interest rates sooner than expected and crush any bubbling inflation. The risk trade takes its cue from economic data and bounces from on-again to off-again and is taking gold prices with it. Investor risk appetite improved earlier after Spain raised money with little drama. Spain sold €3 billion in five-year bonds. Although interest rates rose to 4.54%, the market's optimism signals that this rate is manageable. South Korea also raised key interest rates by 25 basis points to fight rising costs, which helped optimism. The move comes after President Lee Myung-bak reportedly announced a "war on inflation." The Bank of England left rates steady at 0.5% despite the fact that its November consumer price inflation reading popped to 3.3% and is expected to keep rising. The central bank said it expects inflation to fall to 2% in 2012. The European Central Bank left rates unchanged at 1% although President Jean-Claude Trichet did say that there could be short term pressure on inflation, which could move higher maybe even over 2% before reverting lower. The rate divergence is confusing for gold prices. Low rates are good for gold as the local currency is worth less and gold holds more appeal as a form of money that retains value. On the flip side, aggressive moves to raise rates will hurt this thesis and lead the inflation bugs out of the gold market. Emerging-market economies like China, South Korea, Brazil and India are having to contend with rising inflation which has yet to really infect developed markets economies. Gold will get more direction Friday when the U.S. releases its core consumer price index for December. Currently inflation is just 0.6% higher from a year earlier. The core producer price index rose just 0.2%.