Gold Prices Slip on Obama's Mixed 'Fiscal Cliff' Message (Update 1)

Updated from 11:45 a.m. EST with settlement prices and comments from President Obama

NEW YORK ( TheStreet) -- Gold prices dipped Wednesday as traders, who had been searching for some bargains after the prior session's selloff, sold their positions on Barack Obama's mixed message on fiscal cliff talks. The yellow metal lost more than 1.5% on Tuesday.

Gold for February delivery lost $3 to settle at $1,667.70 an ounce at the Comex division of the New York Mercantile Exchange. The gold price traded as high as $1,677.80 and as low as $1,665.10 an ounce, while the spot price was losing $2.90, according to Kitco's gold index.

"Each new fiscal cliff headline from Washington raises or lowers gold prices. The market looks heavy and technically weak for now," George Gero, precious metals strategist at RBC Wealth Management, wrote in a note Wednesday afternoon.

Obama said Wednesday that he was optimistic a deal would get done, but he rejected House Speaker John Boehner's "Plan B" budget proposal. That rejection suggested to some investors that an agreement would not immediately be reached.

Gold prices plummeted on Tuesday shortly after White House Press Secretary Jay Carney said that the president had rejected Boehner's proposal.

"Plan B" would include raising rates on those earning $1 million or more, implementing $1 trillion in spending cuts and locking in a process for tax and entitlement reform in 2013.

Boehner said Tuesday that he expected the House of Representatives to vote on the measure later this week.

The political-rhetoric game continued Wednesday morning as White House communications director Dan Pfeiffer said the administration wouldn't accept "Plan B" because it places too big of a burden on the middle class. Boehner spokesman Brendan Buck criticized the president's opposition as "bizarre" and "irrational."

Silver prices for March delivery shed 55 cents to $31.12 an ounce, while the U.S. dollar index was shedding 0.08% to $79.25.

Housing starts declined to a seasonally adjusted annual rate of 861,000 in November, according to the Census Bureau. Consensus among economists expected 873,000.

The lower-than-expected data could be seen by investors as weakness in the housing recovery. Though housing numbers have been on the upswing for months, traders would view a growing soft trend as negative to the economy but positive to gold prices as a continuation of central bank easing likely would result.

News from China was relatively quiet on Wednesday, a day after the country terminated a large soybean order. The move caused an initial slight drop in gold prices on Tuesday as some analysts said it indicated China may be trying to cool off its economy.

Though eurozone issues have settled down in recent weeks, Standard & Poor's raised its rating late Tuesday on Greece to B minus from selective default. The ratings agency said it elevated the country's rating because eurozone nations had exhibited a strong commitment to keep Greece as a euro-currency member.

Gold mining stocks were mostly lower on Wednesday. Shares of Eldorado Gold ( EGO) were decreasing 2.6%, and shares of Royal Gold ( RGLD) were shedding 1.8%.

Among volume leaders, Yamana Gold ( AUY) was tacking on 0.06%, while Barrick Gold ( ABX) was off 0.38%.

Gold ETF SPDR Gold Trust ( GLD) was ticking slightly lower by 0.32%, while iShares Gold Trust ( IAU) was down 0.32%.

-- Written by Joe Deaux in New York.

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