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.

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