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Wednesday, November 23, 2011 6:02 AM EST

Gold Prices Struggle to Stay Near $1,700

By Mike Obel

Gold prices fell Wednesday on negative economic news from China and Europe plus concerns that the world's No. 1 economy is barely advancing.

The Commerce Department said Tuesday that the U.S. gross domestic product grew at a two percent annual rate in the third quarter, down from the previously estimated 2.5 percent. 

In Beijing early Wednesday, HSBC said that according to a preliminary survey of purchasing managers the world's second-biggest economy shrank the most in 32 months.

Asian stocks fell, with the Hang Seng tumbling more than two percent.

In the Eurozone, the single currency fell toward a six-week low against the greenback after a private group said Eurozone economic activity declined for the third straight month in November. The dollar rose against a basket of major rivals by 0.74 percent to 78.44. 

"Overall, the survey data suggest that the Eurozone is contracting at a quarterly rate of approximately 0.6 percent in the fourth quarter," Chris Williamson, an economist at Markit Economics, the private group that conducted the survey of economic activity, told Dow Jones. "As feared earlier in the year, [the] malaise has spread from the periphery to the core." 

European stocks were falling, with all major equity indexes down. In the U.S., futures for the Dow Jones Industrial Average, the Nasdaq 100 and the S&P 500 were all lower.

Several forces kept gold from falling too far from $1,700. One was the expiry of December options on the Comex.

Another was the International Monetary Fund decision Tuesday to make it easier for the Eurozone's healthy economies to borrow money in case of a liquidity crisis from soaring bond yields in Spain and Italy, among other weak nations.

The new streamlined credit line will "probably act as another form of quantitative easing, as the recipient countries would rather address liquidity, instead of the underlying fundamental problem -- solvency," said Alexander Mirtchev, head of Krull Corp. and president of the Royal United Services Institute for Defence and Security Studies International.

"By its very nature, the credit line engenders inflationary and other global economic security pressures. It will hardly be the decisive factor, but would contribute to the rise of the price of gold."

Gold for December delivery declined $11.50 to $1,690.90, while spot gold fell $16.91 to $1,691.43.

Silver for December delivery gave up $1.24 to $31.72, while spot silver was off 2 cents to $31.81.