Gold and silver prices were slipping Monday in the midst of uncertain markets and a weaker U.S. dollar.
Gold (-GC) for August delivery was down $2.40 to $1,526.80 an ounce at the Comex division of the New York Mercantile Exchange. Gold has traded as high as $1,533.90 and as low as $1,523.50, while the spot gold price was shedding $7.80, according to Kitco's gold index.
Silver (-SI) prices were down 88 cents to $35.44 an ounce. The U.S. dollar index was down 0.2% to $74.66.
Gold and silver prices were lower as markets tried to find their footing. Investors were putting some money to work in stocks as merger activity fueled a rally in the Dow Jones Industrial Average ($INDU) after it closed lower Friday for the sixth consecutive week.
Gold prices were holding up better than other commodities, with oil prices trading around $98.33 a barrel. The two big fears on investors' minds are a global slowdown led by China and the end of the Federal Reserve's $600 billion bond buying program.
Find a new broker and trade online
China announced Monday that the amount of M2 supply, a measure of wealth, at the end of May rose 15.1%, less than the 15.5% increase that was expected. M2 supply measures all the currency in circulation plus checkable deposits, traveler's checks, savings deposits, and money market deposit accounts for individuals.
China’s banks also issued 15% fewer new loans than expected. The People's Bank of China has been raising the amount of money banks must keep in their reserves and raising interest rates for just this purpose: to gradually drain money from the system. Some experts argue that China has reined in growth too fast or that inflation will keep rising and force China to keep these strict monetary policies. Inflation was 5.3% in April; May's reading is due Tuesday.
Barclays Capital, in its weekly commodities note, disagrees. "We do anticipate a more accommodative policy in the second half of 2011." Barclays Capital also has written that the consumer price index will trend lower in the second half of the year. "This should ease the pressure for acceleration in the pace of monetary tightening."
The end of tightening would put a floor under commodity prices as China is a voracious consumer of all metals, and gold in particular. However, until the tightening cycle stops, investors might remain skeptical about demand from China, with its citizens having less disposable income to buy gold.
"The mix of safe-haven diversification and negative real-interest rates continue to create a positive price environment for gold longer-term," says James Moore, research analyst at FastMarkets.com "We expect dips to still be viewed as buying opportunities."
Find out what Jim Cramer is buying now
Any substantial rally, though, could lead investors to sell their gold positions and lock in profits, especially when equities get hit hard. The SPDR Gold Shares (GLD) dumped more than 10 tons on Friday as investors booked gains.
Gold mining stocks were mixed Monday. Barrick Gold (ABX) was gaining 0.4% to $43.73, and Newmont Mining (NEM) was up 0.5% at $52.35. However, Goldcorp (GG) was falling 0.8% to $46.77, and AngloGold Ashanti (AU) was slipping 0.4% at $42.76.
