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Gold Prices Settle Near $1,300

NEW YORK ( TheStreet) -- Gold prices traded around $1,300 Monday as investors tentatively bought the safe-haven asset. Higher prices also got support from weak central bank sales during the past year.

Gold for December delivery settled up 50 cents to $1,298.60 an ounce at the Comex division at the New York Mercantile Exchange. The gold price traded as high as $1,301.30 and as low as $1,295.80 on Monday.

The U.S. dollar index was losing 0.04% to $79.36 while the euro fell slightly to $1.34 vs. the dollar. The spot gold price Monday was down 70 cents, according to Kitco's gold index.

Record high gold prices were sparking some profit-taking and some tentative buying Monday as investors remained cautious over the global economy. Moody's downgraded Anglo Irish Bank's senior unsecured debt to one level above junk status which highlighted the fact that Ireland still has a lot of bailout money to issue as it tries to manage the nation's largest flailing bank.

Traders are also shuffling their books as the third quarter comes to a close on Thursday. Some will need to ramp up their long gold positions to show they own the metal while others might need to sell gold to show a profit.

"We anticipate further resistance short-term on a mix of profit-taking and option/technical selling," says James Moore, analyst at thebulliondesk.com in his daily metals report. "But with little change in the broader economic picture and investors concerned about further devaluing of fiat currencies we expect the bullish trend to continue."

Gold is the go-to investment during times of uncertainty and there is a lot out there for investors to fret about. First off, most analysts are expecting the Federal Reserve to announce another round of quantitative easing at its next meeting in early November. Investors already have been buying gold as protection against a weakening dollar.

The mid-term elections are also just over a month away, and although the expectation is a stalemate in Congress with the House going to the Republicans, the question mark is providing yet another reason for investors to own gold. To add fuel to the fire, the third quarter officially ends Thursday, and many companies have been warning of choppy results.

Also supporting record high gold prices was a report from The Financial Times which said that the 19 central banks within the Central Bank Gold Agreement had sold only 6.2 tons of gold in the past year. Central banks are allowed to sell a combined total of 400 tons of gold each year and this past year represents the smallest amount of sales in 11 years. Their lack of selling underscores the trend that central banks have transitioned into net buyers of gold rather than net sellers.

"There has been a fundamental shift in the behavior of central banks over the past few quarters," says Natalie Dempster, head of investment for the World Gold Council. "Central banks on the whole have been net sellers of gold for the past two decades."
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