Gold falls from record high

By Alix Steel, TheStreet

Updated at 5:10 p.m. ET

Gold prices fell Monday as investors traded in their gold for cash at record high prices and as the U.S. dollar rallied.

Gold for June delivery settled down $6 at $1,468.10 an ounce at the Comex division of the New York Mercantile Exchange. Gold traded as high as $1,478 and as low as $1,465.40, while the spot gold price was shedding more than $11, according to Kitco's gold index.

Investors were cashing in on gold's record rally Friday, when the metal popped 1%. Record prices might also be scaring off traders worried about buying at the top. Silver prices were less impacted, rallying early before settling flat at $40.61 an ounce, despite jumping 7% last week.

The U.S. dollar index was adding 0.3% to $75.05 in a relief rally after the U.S. government avoided a shutdown and nailed down a budget for 2011. The currency had been selling off in anticipation of a government shutdown, which helped push gold higher Friday.

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Oil prices were also reversing their Friday rally as rumors circulated of a possible cease fire in Libya orchestrated by the African Union. Saudi Arabia said it would be able to produce 12.5 million barrels of oil a day if need be, further offsetting supply concerns.

Stocks struggled despite the respite from rising oil prices. The Dow Jones Industrial Average ($INDU) finished up 1 point to 12,381. The S&P 500 ($INX) fell 4 points to 1,324, and the Nasdaq ($COMPX) finished 9 points lower at 2,762.

Silver, despite being affected by the same fundamentals as gold, continued to rally above $40 an ounce. The latest bank participation report from the U.S. Commodity Futures Trading Commission showed contracts betting against silver on the Comex grew 23% since the beginning of the year, which could signal a deeper correction to come -- or the possibility of higher prices if traders buy back those positions after silver's explosive rally.

"The final verdict will be day's end," says Mihir Dange of Arbitrage when asked why silver prices weren't moving with gold. "If it doesn't correct itself out today, it will in the next coming days with either a gold rally or silver sell-off."

Some experts think investors will be reluctant to truly abandon large gold positions as a rally to $1,500 is still waiting in the wings. "Ongoing concerns of EU debt, low interest rates and ongoing inflation concern are bullish longer-term (for gold and silver) with dips to be viewed as a buying opportunity," says James Moore, research analyst at FastMarkets.

Gold mining stocks, a risky but sometimes more profitable way to invest in gold, settled lower Monday. Barrick Gold (ABX) fell 2.4% to $53.08, AngloGold Ashanti (AU) dropped 3.6% to $49.25, and Agnico-Eagle (AEM) lost 1.7% to settle at $65.54.

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Newmont Mining (NEM) slipped 1.3% to $56.95 and Rangold Resources (GOLD) shed 1.6% to finish at $85.85.

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