Gold Prices Settle Flat, Putting Silver in Focus

NEW YORK ( TheStreet ) -- Gold prices closed relatively flat Friday as investor interest waned and interest gravitated toward silver.

Gold for April delivery was lost $2.10 to $1,360.40 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded in a tight range Friday with a high of $1,369.70 and a low of $1,354.30. The spot gold price was losing more than $7, according to Kitco's gold index. P/>

The U.S. dollar index was adding 0.21% to $78.41 while the euro was losing 0.41% to $1.35 vs. the dollar. The stronger dollar was neutral for gold, not causing a big selloff but not allowing it to rally either.

Silver prices settled down 9 cents to $29.99. Prior to today, silver has managed to close above $30 for the past three consecutive trading days.

Silver and gold prices had started gaining a bit of safe haven steam as protests in Egypt heated up, but as soon as President Mubarak announced his long-awaited resignation, the metals gave up recent gains.

George Gero, senior vice president at RBC Capital Markets, said silver was the metal he was focusing on Friday. Mihir Dange, trader at Arbitrage, was thinking about shorting silver this past Monday in order to capitalize on any 50-cent move to the downside, but now has adapted his tune.

"I am bullish," says Dange, who was long silver this morning and will stay long unless the price slips below $29.63. Dange has said that a move above $30 would push prices to $35 an ounce.

"The next leg for these commodities should be up barring any substantial economic or political news in the coming weeks," Dange said.

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Higher gold prices have to contend with a triple-top in which the metal tried three times to break above its intraday high of $1,432 an ounce, which for many technical traders is a cautious sign. It's not that gold can't go higher, but that there are more headwinds aside from fundamentals.

"Gold certainly needs some more work ahead before it can make new highs," argues David Morgan, founder of, "Silver is tougher to analyze."

Silver has yet to reach its past high of $50 an ounce, leaving a lot more space for the metal to move. The gold/silver ratio at 45 is also slightly lower than the 46 at the start of the week -- typically, the lower the ratio, the higher the silver price and vice versa.

If silver is going to outpace gold and head higher "it would have to happen in the next couple of weeks," says Morgan. "If it doesn't make a new high in that time frame, I would expect it to have a high level consolidation ... in the $27 to $30 or maybe even $25 to $30 range.

Silver's recent move hasn't left all analysts bullish. Jon Nadler, senior analyst at, doesn't necessarily think that silver closings above $30 point to another rally.

"The $30.50 resistance mark was touched Wednesday . The camp over at Elliot Wave analysis looks at that touch as the last go-around for silver in a large overall declining wave." Nadler says if a pullback brings prices to mid-$27 then silver could head much lower.

South Korea didn't raise key interest rates, as many were expecting, which usually would have given a boost to the precious metals. The U.K.'s core producer price index rose 3.2% year over year pointing to higher inflation, which should have also helped the complex. But none of those factors led to higher prices.

Gero pointed out that gold was suffering more from a tug-of-war between short covering and traders selling extra long positions.

Investors seem to have lost interest in gold and silver for the short term. The SPDR Gold Shares ( GLD) shed less than 1 ton on Thursday as minor outflows continued.

Next week, the U.S. will release its inflation data for January. Including food and energy prices, which every other country does, inflation is at 1.5% vs. a year ago, well under the Federal Reserve's target of 2%. Federal Reserve Chairman Ben Bernanke cites low inflation and high unemployment as two factors which support the agency's $600 billion bond buying program and low interest rates.

If inflation comes in hotter than expected, pressure could be on for the Fed to raise rates. If inflation is still anemic, low rates will persist. Low interest rates are typically good for gold and silver prices as investors buy the hard asset as a form of money that retains more value than paper currencies.

However, Goldman Sachs released a note on gold recently which said that gold is not a consistent inflation hedge and said inflation fears and loose monetary policies were already baked into higher gold prices. If inflation doesn't actually materialize, gold could see more downside. Goldman also goes on to say that gold doesn't fulfill its role of a safe haven asset in an investor' portfolio as tactical traders have made prices more volatile.

The investment bank has said that gold will hit a top in 2012 but before that could rise to more than $1,700 an ounce.

Gold mining stocks, a risky but profitable way to buy gold, were lower. Kinross Gold ( KGC) was down 1.02% at $16.42 while Harmony Gold ( HMY) lost 1.31% at $10.63.

Other gold stocks New Gold ( NGD) and Gold Fields ( GFI) were trading at $9.18 and $15.87, respectively.

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-- Written by Alix Steel in New York.

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Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

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