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Gold Prices Shine, but for How Long?

Gold prices rallied Thursday on safe haven demand, but a strong U.S. dollar could temper the move.
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Gold prices

popped Thursday as

Cisco's disappointing earnings

and higher initial jobless claims fueled doubts about the sustainability of a global economic recovery and triggered a flight to safety into gold.

Gold for December delivery closed $17.50 higher to $1,216.70 an ounce at the Comex division of the New York Mercantile Exchange. The gold price traded as high as $1,218.50 and as low as $1,199.50 during the session. The

U.S. dollar index

was rising 0.38% to $82.61, while the euro was losing 0.16% to $1.28 vs. the dollar. The spot gold price Thursday was popping $17, according to Kitco's gold index.

Gold prices extended their gains from Wednesday

after weekly initial jobless claims rose to 484,000 and Cisco reported light revenue and a weak guidance for the current quarter. CEO John Chambers cited global uncertainty, a weak job market and concerns over Europe for the disappointing outlook.

The news from Cisco confirmed fears that world economies will continue to struggle and that the U.S. recovery might be stalling out. Investors also took the Federal Reserve's announcement that it would lend more money to the U.S. government as an act of desperation.

Thursday yielded more bad macro news.

Eurozone industrial production

fell 0.1% in June vs. the expected 0.7% rise and

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U.S. retails sales for July

were lackluster, which continued to dampen risk appetite, but mixed a positive cocktail for gold.

Video: Cramer's 'Mad Money' Recap - Gold >>

Gold prices have struggled to conquer and hold the $1,200 level, and the slew of negative news now has prices reaching for the $1,220 resistance area. The popular gold ETF,

SPDR Gold Shares

(GLD) - Get SPDR Gold Shares Report

, which had seen little action in the past week, added more than 3 tons Wednesday as investors sought the safety of gold.

"Gold does appear more robust as safe-haven buying is seen," says James Moore, analyst at in his daily metals report. "The metal still has to conquer overhead resistance around $1205/1215-18 to avoid a further correction."

Gold's rally could be tempered by a weak euro and stronger dollar. The euro fell more than 2% Wednesday as traders ramped up their short positions in the currency and bought the U.S. dollar as a safe haven. Gold typically trades inversely to the U.S. dollar.

Summer historically is also a weak season for gold prices as the lack of festivals in India and China, the largest gold jewelry consumers in the world, leads to lackluster demand. Many analysts are looking towards September for a much-anticipated rally in gold.

Frank Holmes, CEO of U.S. Global Investors, wrote in a note that "the gold price has risen in 17 of the 21 Septembers since 1989. ... In a typical year, the September price rises 2.5% above the August price."

Using today's spot price of $1,216 an ounce, if that dominant pattern holds true, the gold price would bounce to $1,246 in September. The rally would push gold out of its current trading range, but prices would still be a far cry from their intraday all-time high of $1,264 an ounce.

Silver prices

closed 16 cents higher to $18.06 while copper settled up 3 cents at $3.28.

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Gold mining stocks, an alternative way to

invest in gold

, were modestly higher as investors looked for more exposure to gold.

AngloGold Ashanti

(AU) - Get AngloGold Ashanti Limited Report

was up 1% to $43.17 while

Kinross Gold

(KGC) - Get Kinross Gold Corporation Report

added 1.18% to $15.42. Other gold stocks

Gold Fields

(GFI) - Get Gold Fields Limited American Depositary Shares Report


New Gold

(NGD) - Get New Gold Inc. Report

were trading at $14.14and $5.45, respectively.


Written by Alix Steel in New York.

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Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.