Gold Prices Dip on Manufacturing Data

NEW YORK (TheStreet ) -- Gold prices were heading lower as a strong reading on manufacturing activity in the Chicago area lessened the appeal of its safe-haven status.

Gold for August delivery was down $4 to $1,506.40 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,514.80 and as low as $1,501.20 while the spot gold price was down $5.60, according to Kitco's gold index.

Silver prices were holding up better, down 2 cents to $34.74 an ounce while the U.S. dollar index was losing 0.43% at $74.32 and the euro was adding 0.58% against the dollar.

Gold and silver prices have had a volatile day. Gold had been treading water in early trading, but prices headed sharply lower after manufacturing activity in the Chicago area soared in June. Investors were more willing to place bets on riskier stocks and were putting safe haven assets on the back burner. The positive manufacturing reading was a positive for silver, as 50% of what's mined goes directly to the industrial sector.

"Gold still appears to be struggling for traction," says James Moore, research analyst at FastMarkets.com. "Failure to conquer resistance around $1510-12 could potentially lead to a test of chart support around $1485."

A weaker U.S. dollar, which has come under pressure as the euro rallied and Greece secured its next round of bailout money, provided some support for the precious metals.

Despite short-term weakness, some experts are expecting another rally in gold and silver prices during August and September. In 2010, gold prices rallied 11.7% and silver popped 21% during the same time frame. "Typically you see a very big move in the price of gold," says Brian Hicks, co-manager of the U.S. Global Investors Global Resources Fund," we think that will be that case this year as well."

Hicks predicts that gold will be able to break out of its wait-and-see pattern and move solidly above $1,500 and that silver could rally past $40 an ounce but stay below its recent high of $49.82. "Obviously there was a lot of technical damage in the price of silver and that needs to be repaired and eventually we think that will happen."

Gold's appeal as a safe haven buy has diminished as of late. John Chambers, managing director with Standard & Poor's said in an interview with Reuters, that the U.S. credit rating would be slashed to a "D" if it misses an interest payment when the government runs out of cash on August 4th. "D is surprising," says Hicks, "if that were to actually happen then I think you would see a material move in the price of gold as well as silver, but I think the Street is taking a wait-and-see approach."

Gold mining stocks were mixed. Barrick Gold(ABX_) was flat at $44.99 while Newmont Mining(NEM_) was up 0.73% at $53.91. Other gold stocks, Goldcorp(GG_) andAngloGold Ashanti(AU_)were trading at $48.14 and $42.07, respectively.

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