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Gold Prices Settle Near $1,200

NEW YORK (TheStreet) -- Gold prices Monday rose near $1,200 an ounce as investors opted for the safety of the precious metal and sold out of stocks to buy gold.

Why Gold Prices Rise

Gold for June delivery added $17.90 to $1,194 an ounce at the Comex division of the New York Mercantile Exchange. The gold price Monday has traded as high as $1,195.90 and as low as $1,176.80. The U.S dollar index was rising 1.21% to $86.41 while the euro was slumping 1.87% to $1.23 against the dollar. The gold spot price Monday gained $15, according to Kitco's gold index.

Gold prices rallied as fear continued to reverberate throughout global markets which triggered a flight to safety into gold. Markets were volatile Friday as investors unwound some of their positions ahead of options expirations. Those investors who were betting heavily against the market and the euro sold gold and raised cash to reverse some of their short bets.

On Monday, the fear trade was back on as the euro headed toward its four-year low and gold became more appealing as a form of money that keeps its value. Prices are expected to stay in a tight volatile trading range as metal contracts on the Comex are set to expire on Tuesday.

Over the weekend, Spain's central bank bailed out the regional savings bank CajaSur, only the second bank since March 2009 which highlighted the financial fragility of eurozone countries. Germany also announced plans to slash its budget by €10 billion every year until 2016 to keep its finances in check. Germany follows Britain, Greece, Spain and Portugal with budget cuts that could crimp growth in Europe and weigh on prospects of a global economic recovery. These fears are curbing risk appetite and strengthening demand for gold.

"The ongoing uncertainties created by the Eurozone debt situation will continue to draw investors towards safe-haven assets such as gold and the dollar," says James Moore, analyst at thebulliondesk.com in his daily metals report. "[But] short-term [gold is] vulnerable to profit taking and cash generating selling pressure."

Silver prices added 34 cents to $17.98 while copper prices rose 8 cents to $3.14. Investors were buying copper, a key metal in industrial and electrical use, after China indicated it would reign in its attempts to curb spending due to the eurozone debt crisis. The move reassured traders that China would keep spending and building increasing demand for the base metal.

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