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Gold Prices Close Slightly Higher

Gold prices edged higher at the end of trading as investors bought gold on Spain's credit downgrade.



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Gold prices

Friday settled slightly higher after Fitch's downgrade of Spain's debt spooked investors who bought gold as a safe haven asset.

Gold for August delivery, the most actively traded contract, settled up 60 cents after being down for most of the trading day to $1,215 an ounce at the Comex division of the New York Mercantile Exchange. Gold prices Friday have traded as high as $1,217.30 and as low as $1,203.80. The

U.S. dollar index

was up 0.38% at $86.61 while

the euro was slipping

, down 0.72% to $1.22 against the dollar after Fitch downgraded Spain's credit rating from AAA to AA with a stable outlook. The spot gold price Friday was adding over $1, according to Kitco's gold index.

More Downside for Gold Prices?

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Gold prices rebounded Friday after slipping almost $10 in midday trading. Investors had been opting for cash headed into the three-day U.S. holiday weekend, but prices clawed their way back into positive territory after Fitch downgraded Spain's debt. The downgrade comes a few weeks after Standard & Poor's slashed its rating to AA with a negative outlook. The news highlighted the likliehood of more bad news to come out of eurozone countries, and investors bought gold as a crisis hedge. Gold prices were continuing their climb higher after the Comex closed.

Gold prices have risen 2.5% in May after reaching a record high of $1,249 an ounce. In the short term, gold prices need to break and hold the $1,220 level before analysts feel confident that gold will resume its climb higher. For the long term, commodities will be held hostage by the euro, sovereign debt issues and geopolitical problems.

North and South Korean tensions have eased for the time being, but North Korea has forbidden any South Korean ship to enter its waters. Over in Europe, Spain's austerity measures, which will reduce spending by $18.4 billion through 2011, passed by just one vote in parliament. Some officials disgruntled over the pension freezes and pay cuts are calling for early elections. There is still the worry that the massive budget cuts by European Union nations will actually hurt future growth and curtail the global economic recovery.

Gold is a hedge against financial, political and international crises, and prices should benefit long term from any more bad news. "The build in SPDR & iShare holdings yesterday, and demand for OTC coins and bars reflects investor concerns over the European debt situation and should continue to provide background support," says James Moore, analyst at

. "

However, gold is vulnerable to further long liquidation short-term due to the scale of speculative longs and signs of tightening money-market rates."

Silver prices

also paired losses and settled down just 4 cents to $18.42 while copper closed 5 cents lower at $3.10.

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Gold mining stocks, a more risky but more profitable way to

invest in gold

, were mixed.

Barrick Gold


TheStreet Recommends

was sinking over 1% to $42.03 while

Newmont Mining

(NEM) - Get Newmont Goldcorp Corporation (NEM) Report

was down almost 2% at $53.86. Other big mining companies

Kinross Gold

(KGC) - Get Kinross Gold Corporation Report




was trading at $17.05 and $42.97, respectively.

Shares of

Freeport McMoran Copper & Gold

(FCX) - Get Freeport-McMoRan, Inc. (FCX) Report

was falling 2% to $69.65, while

AngloGold Ashanti

(AU) - Get AngloGold Ashanti Limited Sponsored ADR Report

was trading down over 1% lower at $41.85.

The gold ETF,

SPDR Gold Trust

(GLD) - Get SPDR Gold Trust Report

, was flat at $118.70. The exchange-traded fund still holds a record 1,267 tons as investor demand surged this week.


Written by Alix Steel in New York


Alix joined TV in February 2007. Previously, she held positions in film and theater production, management, and legal administration. Alix has a degree in communications and theater from Northwestern University.