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) --

Gold prices

shrugged off earlier volatility and settled at a record high Monday.

Gold for December delivery settled $9.10to $1,354.40 an ounce at the Comex division of the New York Mercantile Exchange. The gold price traded as high as $1,356.30 and as low as $1,341.10 during Monday's session.


U.S. dollar index

was inching up 0.31% to $77.42 while the euro was down 0.36% to $1.39 vs. the dollar. The spot gold price was up more than $6, according to Kitco's gold index.

Earlier in Monday's trading, gold's 2% October rally triggered some profit-taking as investors used the money to buy stocks in anticipation of more monetary easing from the

Federal Reserve

. However, the slight selling was met by buyers, purchasing gold as insurance against more monetary easing, which pushed gold prices back into positive territory.

"Buyers are using gold and silver to hedge possible losses in purchasing power," says George Gero, senior vice president, financial consultant at RBC Capital Markets.

This tug of war will continue to constrict gold prices as the metal looks to the Fed's minutes from the its previous meeting for direction. The minutes, which should provide hints of how the Fed is likely to act, are due out Tuesday.

Fed Chairman Ben Bernanke has come out in opposition of raising the inflation target, which would have called for the Fed to run its printing presses for longer to reach a higher inflation rate over an extended period of time.

Nevertheless, it seems like some type of government bond purchase program, whether long or short term, will happen, especially after Friday's weak unemployment report. There are dissenting voices in the Fed on how the central bank will pump more money into the system so traders will be eyeing the Fed minutes to provide direction.

Most analysts think that investors will keep hedging their riskier bets with gold and the prices will head higher despite intermittent profit-taking and minor corrections.

"I have actually been buying some puts on some major mining companies as a hedge," says David Morgan, founder of

. "There's a lot more people on the bullish side than bearish side ... I'm just putting a little protection on here."

The annual meeting of the International Monetary Fund and world bank leaders over the weekend proved that there is no end in sight to the recent currency battles that have been brewing. Countries, particularly those from emerging markets like Brazil, have been trying to lower the value of their currencies in order to help export demand.

Leaders were trying to nudge China to let its currency rise quickly in value to help other countries, but no agreement was reached. Signs of currency fragility are good long term for gold prices because the metal shines as an alternative form of money that can't be inflated.

Also providing some support for prices was a report on

which said that gold imports in India rose 30% in September from August to 34.8 tons.

September is typically a strong gold-buying month in India as the start of its wedding and festival season mixed with a culture of buying gold jewelry as gifts result in heavy consumer demand.

"Any time there is a spike

Indians slow their buying," says Frank Holmes, CEO of U.S. Global Investors. "Anytime there is a big correction, $150, all of a sudden they come in and they provide a floor for the price of gold ... I think there is an emotional attachment. They are also getting a lower value of gold, mixing with other elements ... but still that demand for gold content is there."



also reported that India's gold ETF holdings in September rose 90% which could also account for the import pop of gold into the country.

Other emerging markets are also beefing up their gold offerings.

Dow Jones Newswires

reported that a new gold exchange-tradded fund will be launched in Hong Kong in October. The Value Gold ETF is a physically backed ETF where the gold will be held locally.

Physically backed ETFs have become massively popular as investors diversified into gold. The U.S. gold ETF,

SPDR Gold Share


, the second largest ETF in the world, currently holds 1,288.23 tons, a 98% increase from two years ago.

Investment demand has recently outpaced jewelry demand as a driver in higher gold prices. In the second quarter, identifiable investment demand from bullion and gold ETFs rose 118% while jewelry demand fell 5%, according to the World Gold Council.

Although investment demand is becoming increasingly important, jewelry still accounts for 60% of total gold demand, which makes physical demand from emerging market countries as well as investment demand instrumental in supporting higher gold prices.

Silver prices

settled 24 cents higher at $23.34 while copper closed up 1 cent at $3.78.

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Gold mining stocks

, a risky but potentially profitable way to

buy gold

, were mixed Monday.

Yamana Gold


was up 0.35% to $11.58 while

Freeport McMoRan Copper & Gold


was slightly higher at $95.80. Other gold stocks

Gold Fields



New Gold


were trading at $15.74 and $7.10, respectively.


Written by Alix Steel in New York.

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Alix Steel


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