NEW YORK ( TheStreet) -- Gold prices clawed their way higher Wednesday as moderate buying continued, but prices were still trapped in a tight range.

Gold for February delivery added $2 to $1,370.20 an ounce at the Comex division of the New York Mercantile Exchange. The gold price traded as high as $1,378.90 and as low as $1,365.50 during Wednesday's session. The spot gold price was adding more than $3, according to Kitco's gold index.

The U.S. dollar indexwas drifting lower down 0.62% to $78.50 while the euro was rallying 0.74% to $1.34 vs. the dollar.

Gold prices seem to be looking for some kind of catalyst to break them out of their range of $1,320-$1,420 an ounce. Traders are nibbling at gold after the metal stemmed its Friday selloff, but any big positions are being kept on the sidelines until an upward trend can be confirmed. Any run-up, as was seen in early morning trading, can also provide an opportunity for investors to take profits.

The popular gold exchange-traded fund, SPDR Gold Shares ( GLD), shed almost 3 tons on Tuesday as light profit-taking continued while iShares Gold Trust ( IAU) has not adjusted its tonnage since Dec. 23.

Scott Redler, chief strategic officer for T3Live.com, says that gold has lost its identity a bit and it's no longer a fear trade.

"I think gold could regain this identity as we go into the second quarter" as debt issues in U.S. states and controversy on raising the debt ceiling put money issues in the foreground.

"Long term, as long as the Fed continues to pump money into the system and there are problems in the eurozone," argues Phil Streible, senior market strategist at Lind-Waldock, "I think gold will continue to catch a bid."

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Jim Cramer writes on RealMoney.com that he still likes gold as a hedge, that "the amount of money that is being printed worldwide is outrageous and I can only conclude that you need something as a hedge to the printing press."

Cramer likes the GLD and currently owns NovaGold ( NG), a junior gold and copper miner, for his charitable trust, Action Alerts Plus.

The spot price is also stronger than the futures price which points to strong physical buying most likely from emerging-market countries like India and China where inflation is high. China is also buying gold ahead of its New Year celebration in February.

George Gero, vice president at RBC Capital Markets, also notes that ETFS Physical Asian Gold ( AGOL), which launched on Friday, helped physical demand as gold was needed to fulfill orders. The ETF stores its gold in Singapore.

As gold waits for its safe-haven bid to continue, it's getting direction from a stronger euro and weaker dollar. Portugal raised €750 million in 12-month bonds at an average yield of 4.02% which was 1.25% less than its previous auction as investors seemed more willing to lend money to the country.

Germany also raised its 2011 growth estimates to 2.3% from 1.8%. Germany's economy has been helped by a weaker euro as it makes its exports more attractive and cheaper to buy. Its industrial boom has helped support the country and the eurozone but some experts worry that as demand slows to a snail's pace in struggling EU countries that Germany could lose an important demand factor.

According to Reuters, the Hong Kong press said Wednesday that consumer prices in China rose to 4.6% in December vs. a year ago, which is less than its 5.1% reading in November. China reportedly grew 10.3% in 2010. The official numbers won't come out until Thursday but if the reading is accurate it shows that inflation isn't as high as previously thought, which could take pressure off the country to raise interest rates.

China hiked its interest rate by 25 basis points on Dec. 27 and the central bank increased the amount of money banks must hold in their reserves on Friday, the seventh time in the past year. Currently the one-year deposit rate is 2.75%. If the inflation reading is accurate at 4.6%, the real interest rate in China is negative 1.85%.

The typical theme for gold is that it is a good hedge against inflation. But what it really is is a hedge against negative real interest rates, the inflation rate minus the interest rate. A negative rate means the local currency is worth less and gold, which has no yield, retains its value and is worth more.

Crimping gold's safe haven/inflation thesis have been better-than-expected earnings from U.S. companies like Apple ( AAPL) and IBM ( IBM). Investors might be looking to put their money to work in certain sectors and stocks rather than gold.

"You don't always have to be in a metals trade," argues T3Live.com's Redler, "you need to be where the action is. You should have a percentage of your portfolio ... in the metals" but you can change that percentage. Redler sees the focus more on technology and the financials rather than the metals.

Silver prices ended down 11 cents to $28.80 while copper was down 5 cents at $4.37. The industrial metals took a hit after housing starts in December were weaker than expected. Despite the fact this means that inventories will be able to clear out, demand for metals used in construction will wane in the near term.

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Gold mining stocks, a risky but potentially lucrative way to buy gold, were mixed. Kinross Gold ( KGC) was up 0.42% at $16.90 while Great Basin Gold ( GBG) was adding 0.78% at $2.59. Other gold stocks New Gold ( NGD) and Gold Fields ( GFI) were trading at $8.52 and $16.60, respectively.

-- Written by Alix Steel in New York.

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