GOLD : Bullion Prices Dip Below $400, Then Recover Slightly

Gold prices slipped below the critical $400 an ounce level in New York on Wednesday. Even though it managed to close slightly higher, traders said the precious metal faces an important test in coming weeks.

On the New York Commodity Exchange, gold fell as low as $399 an ounce, weighed down by the dollar’s stubborn rise, but recovered to close at $400.20, off $3.40. The metal last traded below $400 on Jan. 3.

Gold has fallen in recent sessions as investors shifted funds into the rising dollar.

Many industry analysts said that whether gold continues to slip or makes a recovery is now in the hands of an important group of precious metals traders, normally bargain hunters, in the Far East.

“Gold has lost the attention of traders in the Far East and they’ve apparently found more exciting places to put their money,” said John Brimelow at Keane Securities Inc.

“The key in the next few days is whether there will be renewed buying interest in Asia, which played a major role in starting the bull market in the last quarter of last year,” said Jeffrey Nichols at American Precious Metals Advisors, a consulting firm.

He noted that the Asian investors typically buy gold during periods of price weakness.

“As the market reaches the important support zone of $393 to $400, the lack of buying may indicate a temporary halt in the bull market,” Nichols said.

Analysts said the metal is facing a major test around these levels.

“But if the underlying structure of the market is favorable, then gold will soon come back to life,” said Keane’s Brimelow.

Analysts said the rising dollar has cut deeply into foreign demand for gold, notably in premier centers such as Taiwan and Hong Kong.