Gold Prices Thumped by Eurozone Woes (Update 1)

Updated from 10:46 a.m. EDT with settlement prices

NEW YORK ( TheStreet) -- Gold prices sank Wednesday as uncertainties emanating from Spain and Greece forced the euro lower against the U.S. dollar.

Gold for December delivery dropped $12.80 to settle at $1,753.60 an ounce at the Comex division of the New York Mercantile Exchange. The gold price traded as high as $1,768.40 and as low as $1,738.30 an ounce, while the spot price was down $7.80, according to Kitco's gold index.

"European economic slowdown will hurt gold," said Adrian Day, president of Adrian Day Asset Management. "I think the immediate response to negative news from Europe -- and has been for some time -- has been negative for gold partly because of a recession fear and then partly because when Europe gets worse the dollar goes up, and the dollar going up is obviously negative for gold."

Silver prices for December delivery fell 1 cent to settle at $33.94 an ounce, while the U.S. dollar index was gaining 0.26% to $79.92.

Eurozone troubles continued Wednesday as investors were unclear as to when Spain would officially request a bailout, and as anti-austerity strikes gripped Greece.

The euro was dipping to $1.2854 from the prior day's $1.2900 against the dollar.

Gold's drop was compounded with continued profit-taking by investors who had ridden the yellow metal's surge higher since the middle of August, driven by the Federal Reserve's monetary stimulus program called QE3. Gold could also be headed into a seasonal move down, said Day, because October usually marks a selloff, whereas August and September typically have proven resilient months for the precious metal.

Gold investors could be looking to Thursday's U.S. gross domestic product and initial weekly jobless figures. Strong returns could suggest signs of recovery, which may worry investors that the Fed's open-ended mortgage-backed security purchases could end sooner. As to how soon, that's difficult for analysts to predict.

But for as long as European troubles continue, and the European Central Bank kicks the can down the road on bailouts, gold would seem poised for a sustained rally.

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