ul 16, 2010 (DailyFX via COMTEX) -- Gold has topped. Please see the latest special report for details. Near term, gold is making its way lower and in an impulsive fashion. Look for gold to form a low next week as wave 5 comes to an end. Expectations will then be for a move back to 1220.

NEW YORK, Jul 16, 2010 (Dow Jones Commodities News via Comtex) --

By Matt Day
   Of DOW JONES NEWSWIRES

Gold futures slid Friday, nearing seven-week lows, as traders fled a market that has been unable to sustain rallies recently while equities and currency markets have been largely stable.

The most actively traded contract, for August delivery, fell $17.10, or 1.4%, to $1,191.20 an ounce on the Comex division of the New York Mercantile Exchange. It was the first time the most-active contract had dropped below $1,200 an ounce since Tuesday, and prices at their intra-day lows neared their lowest levels since May.

The failure of gold to hold on to gains this week may be sending a sell signal to investors, said Jimmy Tintle, broker and analyst with Transworld Futures in Tampa, Fla.

"I think it's all coming out of speculation," he said. "People are getting jittery about gold holding $1,200."

Gold has received mixed signals from currency markets, and the pressure continued Friday. Some invest in the metal as an alternative currency when others falter, and the decline in the euro during Europe's fiscal crisis provided strong support to gold. But as the European currency surged to two-month highs against the dollar this week, analysts say traders became less likely to demand gold as an alternative.

Gold futures have rallied recently on moments of weakness in the dollar and uncertain equities markets, but have not been able to sustain price increases as uncertainty about the direction of the global economy continues. Weaker U.S. and Chinese growth indicators point to a precarious recovery, but analysts say with markets showing signs of stabilizing, gold lacks support from the flight-to-quality buyers who propelled the metal to record prices earlier this year. Investors sometimes buy gold on the belief that it holds its value better than other assets during times of economic turmoil.

Meanwhile, U.S. consumer price data released Friday eased fears of deflation, but reaffirmed that inflation is also not likely on the horizon, adding pressure to gold. Gold is sometimes purchased as a hedge against inflation.

The Labor Department said U.S. June consumer prices fell 0.1%, largely due to a decline in energy prices. The core measure, which leaves out volatile food and energy prices, rose 0.2%. Analysts say the report doesn't fundamentally change the outlook for precious metals.

-By Matt Day, Dow Jones Newswires; 212-416-4986; matthew.day2@dowjones.com

(END) Dow Jones Newswires

07-16-10 0930ET