Gold Prices Dip, Can't Shake Strong Economic Data (Update 1)

Updated from 11:58 a.m. ET with settlement prices and analyst comment

NEW YORK ( TheStreet) -- Gold prices dipped on Wednesday after better-than-expected economic data suggested more strengthening in the U.S.

Gold for April delivery shed $3.30 to settle at $1,588.40 an ounce at the Comex division of the New York Mercantile Exchange. The gold price traded as high as $1,598.80 and as low as $1,584.40 an ounce, while the spot price was lowered by $5, according to Kitco's gold index.

The Census Bureau said Wednesday retail sales rose 1.1% in February, better than expectations of 0.5% and a jump up from the prior month's revised 0.2% increase.

"Retail sales were positive . . . they were double what they were expected to be, so gold came all the way back off any gains that we had overnight," said Thomas Vitiello, principal at Aurum Options Strategies, LLC.

One analyst said he thinks the retail sales number shows that American consumers aren't acting like times are tough.

"There's a dichotomy between what they're saying and what they're doing," said Frank Braddock, senior portfolio manager at JHS Capital.

Gold prices had held in a tight range overnight before making a slight tick higher before 7 a.m. EST, and then erasing those gains shortly ahead of the retail sales report. Gold shot to its intraday highs -- seemingly poised to test the $1,600 an ounce psychological threshold -- after the retail sales number printed, but failed to return to those levels.

"It's just kind of directionless," said Vitiello, "But the pain I think is to the upside here for a lot of people -- a lot of shorts in the markets. I'm not getting bullish, but I am saying that you got to be careful being short here."

U.S. dollar strength also contributed to downward pressure on the yellow metal.

Silver prices for May delivery lost 21 cents to close at $28.96 an ounce, while the U.S. dollar index was gaining 0.42% to $82.93.

The greenback was gaining ground on Wednesday against the euro currency at $1.2960 compared to the prior day's close at $1.3033. The dollar was also improving slightly against the yen to 96.10 yen, up from the previous day's close at 96.09 yen.

Bundesbank President Jens Weidmann emerged Tuesday and said the eurozone had only recovered "some" of the confidence it had lost since the sovereign debt crisis. The German central banker's comments suggested that there still remained lingering weaknesses among European economies that could hinder recovery there.

The Bank of Japan continued to await approval of a new central bank governor, as most reports have said Haruhiko Kuroda, a monetary policy dove, soon will attain the post. Should Kuroda move through with a much more accommodative approach, gold prices could be one of the biggest asset-class beneficiaries.

Gold mining stocks closed mostly lower on Wednesday. Shares of NovaGold Resources ( NG) and shares of Eldorado Gold ( EGO) slipped 3.2%.

Among volume leaders, Barrick Gold ( ABX) finished off 2.1%.

Gold ETF SPDR Gold Trust ( GLD) slid 0.34%, while iShares Gold Trust ( IAU) dropped 0.26%.

-- Written by Joe Deaux in New York.

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