Gold Prices Fall as the Dollar Strengthens (Update 1)

Updated from 11:43 a.m. ET with a gold sentiment index and settlement prices

NEW YORK (TheStreet) -- Gold prices fell Tuesday as the dollar strengthened helping to mute a recent jump for the yellow metal.

Gold for February delivery at the COMEX division of the New York Mercantile Exchange closed down $8.40 to $1,229.60 an ounce. The gold price traded as high as $1,244.70 and as low as $1,224.20 an ounce, while the spot price was losing $5.80, or 0.47%.

"It looks like the buyers have run out of steam a little bit," James Steel, chief of commodities at HSBC Bank USA, said in a phone interview from New York. "The market has been carried by short covering, mostly, I think, since the new year."

Silver prices for March delivery lost 32 cents to settle at $19.79 an ounce, while the U.S. dollar index was adding 0.25% to $80.86.

Traders said gold has resistance -- a technical level below which the asset is likely to trade -- at about $1,250, but that physical buying in Asia has supported the price at about $1,200 for market participants who find the yellow metal cheap at that price.

What the pros are saying about Monday's gold flash crash:

  • UBS Precious Metals Analyst Joni Teves: "Despite yesterday's short-lived 'mini flash-crash', gold has climbed about $60 from the late December lows on a combination of short-covering ahead of this week's index rebalancing activities and physical buying particularly out of Asia. While further upside cannot be ruled out in the short-term on the back of these factors, the macro backdrop remains intact and so are the challenges that are in store for gold for the rest of this year."
  • Marex Spectron Head of Precious Metals David Govett: "Was it a fat finger causing the flash crash? Or someone attempting to manipulate the market? Or just someone selling a large order into a vacuum? I'm not sure we will ever know the truth as the CME seem very disinterested in investigating what to me are completely illogical moves, but personally I would go for a combination of the latter two."
Physical Gold Sentiment: BullionVault's gold investor index, which measures gold sentiment for "Western" households, in December dropped to 52.9, from 54 in November. A reading above 50 suggests there are more buyers than sellers. The reading, concluding the weakest year for gold in three decades, was far below the year-ago mark of 58.3.

Gold mining stocks were mostly lower, in line with gold futures. NovaGold Resources  (NG) fell 2.2% to $2.69, while Newmont Mining  (NEM) slid 0.54% to $23.95 a share.

Gold ETF SPDR Gold Trust (GLD) lost 0.57% to $118.82, while iShares Gold Trust (IAU) was off 0.46% to $11.96.

-- Written by Joe Deaux in New York.

>Contact by Email.

More from Gold

Market Bears Have Devoured Gold Prices

Market Bears Have Devoured Gold Prices

Gold to Skyrocket as Italian Rebellion Unfolds

Gold to Skyrocket as Italian Rebellion Unfolds

2010-Style Crisis Approaches: Prepare For Flight To Safety

2010-Style Crisis Approaches: Prepare For Flight To Safety

Gold Prices Look 'Rich' at Current Levels - Here's What Could Change That

Gold Prices Look 'Rich' at Current Levels - Here's What Could Change That

Watch This If You're Wondering How Much Gold to Have and When to Sell

Watch This If You're Wondering How Much Gold to Have and When to Sell