The ratings agency Moody's warned of a downgrade of the US government debt rating should Congress fail to avoid the so-called fiscal cliff. Gold prices rose another $6.60 to $1,738.40 while silver rose 10 cents to $33.74 an ounce. The uptrend in gold shows that investors still see gold as a safe haven status.
By Joe Deaux
09/11/12 - 10:18 AM EDT
NEW YORK (TheStreet) -- Gold prices were gaining Tuesday shortly after ratings agency Moody's warned of a downgrade of the U.S. government debt rating should Congress fail to avoid the so-called fiscal cliff.
Gold for December delivery was rising $6.60 to $1,738.40 an ounce at the Comex division of the New York Mercantile Exchange. The gold price traded as high as $1,739.40 and as low as $1,728 an ounce, while the spot price was up $11, according to Kitco's gold index.
"You're seeing the dollar index come off when that news broke, and momentum in gold, silver and euro currency all pushed up," said Phil Streible, senior commodities broker at RJO Futures.
Silver prices for December delivery were up 10 cents at $33.74 an ounce, while the U.S. dollar index was dipping 0.45% to $80.03.
Moody's announcement came early Tuesday - the agency said the U.S. triple-A rating would be in jeopardy if the U.S. did not reach a budget deal that would determine the fate of the expiring Bush tax cuts, the payroll tax, the Alternative Minimum Tax and critical spending cuts. Congress' inability to address these issues, many economists have argued, would thrust the country into a recession.
As such, gold's slight upward tick suggested investors have continued to look to the yellow metal as a safe haven, despite a recent surge in prices that encouraged profit-taking in Monday's session.
Looking ahead, traders have an eye on Thursday's Federal Reserve meeting, at which the Fed could announce a fresh round of quantitative easing.
Fed Chairman Ben Bernanke said two weeks ago at the Jackson Hole, Wyo, economic summit that he was gravely concerned about the labor market, and said QE3 could be near.
Investors are also anticipating the German Constitutional Court's decision on Wednesday as to whether it would back the European Central Bank's new bond-buying program, which ECB President Mario Draghi disclosed last week.
Gold mining stocks were mostly higher on Tuesday. Eldorado Gold (EGO) and NovaGold Resources (NG) were among the biggest gainers, as shares of the companies were up 2.6% and 2.7%, respectively.
Among other mining stocks, Gold Fields (GFI_) was down 0.08%, while Yamana Gold (AUY_) and Barrick Gold (ABX_) were rising 0.43% and 1%, respectively.
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