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Gold Prices Advance Consecutive Days on Safety Play (Update)

Updated from 12:28 p.m. ET with settlement prices and Cypriot parliament update

NEW YORK ( TheStreet) -- Gold prices rose for a second straight session on Tuesday as investors turned to the yellow metal for its traditional appeal as a safety play.

Gold for April delivery added $6.70 to settle at $1,611.30. The gold price traded as high as $1,615 and as low as $1,599 an ounce, while the spot price was adding $5.20, according to Kitco's gold index.

"Gold prices dipped below $1,600 [early Tuesday morning]; a lot of people now recognize that $1,600 and $1,598 were key levels of resistance, now they're key levels of support," said Phil Streible, senior commodities broker at RJO Futures. "You got a lot of guys getting out of the market going long down at those levels. . . . It's a safety play."

That safety move entered the gold markets on Monday when traders started to digest the news from Cyprus that European Central Bank officials were requiring the small Mediterranean island nation-state to tax bank deposits in order for the country to receive about €10 billion in bailout funds.

The Cypriot parliament voted down the deposit tax on Tuesday, and expected to adjourn until Thursday.

The proposal has drummed up mixed reactions from market participants across the globe.

"The event itself is a non-event, it's implications or the fact that anyone would suggest a remedy of that sort is what's most concerning, and I think the market's dismissing it," said Brad Wheelock, senior vice president of the private client group at RBC Wealth Management. "The market's saying, 'Hey, it's a one-off, there's no threat to [taxing bank deposits] in any other countries.'"

Conversely, some analysts expressed their concern that the proposal for haircuts on Cypriot bank deposits would set a precedent for other troubled debtor nations to follow.

"I think [Cyprus] will have an influence moving forward because, although the response was muted yesterday and today, going forward people are going to have time to act and they have time to prepare," David Williams, director of Strategic Gold, said in an interview. "The ECB officials were going to reach in and grab depositors' money. If they can do it there, they can do it in other places. Going forward, that builds distrust and that's going to move markets."

Despite the two-day run up in gold prices, the U.S. dollar index has been charging higher. Typically gold -- which is priced in dollars -- dips lower as the greenback strengthens, but concerns about how Cyprus may affect the eurozone has weakened the euro currency.

The dollar was strengthening against the euro to $1.2867, or 0.69%, from the prior day's settlement at $1.2956.

Silver prices for May delivery decreased 3 cents to $28.84 an ounce, while the U.S. dollar index was adding 0.39% to $82.98.

Investors may take a short reprieve on Wednesday from events unfolding in Cyprus to plug into the Federal Reserve's announcement from its policy-making wing. Chairman Ben Bernanke will emerge shortly after the announcement to host a press conference.

On the minds of journalists Wednesday afternoon will likely be any hint from Bernanke as to how long he and the Fed expect to continue their $85 billion in monthly, open-ended purchases of mortgage-backed securities and longer-term Treasuries. A slew of better-than-expected economic indicators in recent weeks have led some market participants to speculate that central bankers would see improving economic strength as an opportunity to scale back its easing policies.

Bernanke and many of his colleagues continue to reinforce their commitment to the current quantitative easing programs, but other members have expressed their belief that a drawdown will soon be necessary.

Gold mining stocks were mixed on Tuesday. Shares of Yamana Gold (AUY) were up 2.5%, while shares of Eldorado Gold (AU - Get Report) were dipping 1.8%.

Among volume leaders, Barrick Gold (ABX - Get Report) was decreasing 0.31%.

Gold ETF SPDR Gold Trust (GLD) was up 0.37%, while iShares Gold Trust (IAU) was gaining 0.45%.

-- Written by Joe Deaux in New York.

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