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Gold, Silver Prices Move Higher

NEW YORK ( TheStreet ) -- Gold and silver prices were higher Monday as investors digested Friday's disappointing jobs report in the U.S. and braced for a possible interest rate hike in China.

Gold for August delivery was adding $11.80 at $1,554.20 at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,555 and as low as $1,541.60 while the spot gold price was up $10.50, according to Kitco's gold index.

Silver prices were rising 86 cents to $37.05 an ounce.

Investors were turning to gold and silver as a safe-haven investments after Friday's dismal U.S. jobs report and as experts debated just how bad this soft patch is. U.S. 2011 growth forecasts, once at 3% to 4%, are now at 2% to 3%. With sentiment negative, gold and silver make attractive investments but lackluster buying indicates that many investors might also be holding cash as they wait for market direction.

"The rally in gold again reflects the metal's appeal as a safe-haven/store-of-wealth," says James Moore, research analyst at Gold is "well placed to extend to fresh highs as recent weak U.S. data shifts Fed rate hike expectations further back."

Many experts thought the Federal Reserve would raise key interest rates in the second half of 2011, but now expectations are for low rates until 2012. Moore warns, however, of a potential gold selloff as investors, panicked over losses in stocks and other commodities, dump gold for profits especially as gold hits against its record settle of $1,557.

Although a rate hike from the Fed might be long coming, expectations are that the European Central Bank will raise rates, currently at 1.25%, at its July meeting especially as the IMF, European Union and ECB step in to help Greece with another bailout.

Rate hikes can be bad for gold prices if interest rates start to outpace the inflation rate, which would mean money in the bank is now worth more than gold, which doesn't earn interest. That thesis hasn't capped gold demand in China despite the fact the country has raised interest rates four times since the fourth quarter of 2010 and many are anticipating more aggressive rate hikes soon.
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