NEW YORK ( TheStreet ) -- Gold prices were headed lower Monday as investors took profits after gold rallied almost 4% last week.

Gold for February delivery was down $9.20 at $1,742.10 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,758.80 and as low as $1,732.20 an ounce while the spot price was down $6, according to Kitco's gold index.

Silver prices were adding 17 cents at $32.86 an ounce while the U.S. dollar index was down 0.56% at $78.24.

Gold was also decoupling from the stock market -- the two have been moving in tandem of late. Any sell off in stocks can prompt gold selling as investors need to raise cash. On the flip side, if markets head higher and traders still need cash they might be more apt to sell gold then a stock up 10%.

There was steady buying from Asia overnight and Western traders took advantage of the price move to lock in gains and are tentative to bet big on gold.

The latest commitment of traders report for the week ended November 29th showed that total long positions decreased by 28,000 contracts and short positions sunk 21,000 contracts. This means that part of gold's recent rally was short covering, which was then countered by investors exiting out of some of their long exposure.

"Speculative financial investors are still showing reticence," wrote CommerzBank. Still, gold prices this week will still be shaped by the sovereign debt crisis in Europe said CommerzBank.

There are many reports swirling about major financial initiatives to help stabilize Europe. European central banks, through the European Central Bank, could lend up to 200 billion euros to the International Monetary Fund, which could then lend that money back to weaker European governments. The Federal Reserve could also be prepping to lend more money to the International Monetary Fund along with the ECB. The ECB could also be lining up 1 trillion eruos to buy sovereign bonds if deeper fiscal consolidation among the 17 nations on the euro is agreed upon.

The ECB is also meeting on Thursday. After slashing rates by 0.25% at its last meeting, the expectation is that it could do so again. "Our economists anticipate a rate cut of 25 basis points to 1%," says CommerzBank. "This should lend support to the gold price since the opportunity costs of holding gold will remain low." When interest rates stay lower than inflation rates, currently at 3% for the Eurozone, cash in the bank is worth less, which makes gold more attractive to own.

D-day for the Eurozone will start Friday at a two-day European summit where leaders are expected to discuss a plan for tighter fiscal unity, which means there will be legal ramifications if a country doesn't reduce its budget deficit by the agreed upon amount - a lack of sovereignty for more unity.

Gold will also be hostage to the U.S. dollar. A strong rally in the currency on safe haven buying will pressure gold while any deep selloff in the currency will support gold prices as the metal gets cheaper to buy in other currencies.

"The U.S. dollar index appears to be topping out," says Mark Arbeter who also acknowledges that the index could make one final push higher adding short term pressure on all commodities including gold. However, longer term Arbeter thinks "gold could challenge its all-time highs up- near $1,900 an ounce and possibly reach $2,000 an ounce early next year."

Gold mining stocks were waffling Monday. Barrick Gold ( ABX) was shedding 0.92% to $50.55 while Newmont Mining ( NEM) was down 0.48% at $66.70.

Other gold stocks, Goldcorp ( GG) and NovaGold ( NG) were drifting lower at $51.16 and $10.89, respectively. They will be two stocks to watch today.

Goldcorp increased its annual dividend to 54 cents a share and NovaGold released its updated feasibility study for Donlin Creek in Alaska, co-owned with Barrick.

Donlin will produce 1.5 million ounces of gold at cash costs of $409 an ounce for the first 5 years of production and then 1.1 million ounces of gold a year for 22 years at $585 an ounce. The gold is split evenly between Barrick and NovaGold. Capital expenditures are $6.7 billion, $300 million lower than previously reported, for the next 5-6 years, which accounts for building a natural gas pipeline and a big contingency buffer of $1 billion. NovaGold's share of that is $3.35 billion.

-- Written by Alix Steel in New York.

>To contact the writer of this article, click here: Alix Steel.

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