NEW YORK (

TheStreet

) --

Gold

and

silver prices

shined as safe haven assets Tuesday on a broad commodity rally and as European debt worries plagued investor sentiment.

Gold for June delivery added $7.90 to $1,523.30 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,529 and as low as $1,513.20. The spot gold price was up $7.50, according to Kitco's gold index.

Silver prices jumped $1.22 to $36.12 an ounce. The U.S. dollar index was shedding 0.38% to $75.85 which was helping the metals as they became cheaper to buy in other currencies.

Vote: How High Will Silver Prices Go in 2011?

European woes were front and center Tuesday. European countries have reportedly been preparing for a Greek default that would result in delayed repayments.

Moody's

is also threatening to downgrade the credit rating of some of the U.K.'s biggest banks.

Vote: Where will gold prices finish in 2011?

Long term borrowing costs for Italy, Portugal, and Spain jumped Monday as investors were reluctant to lend money to the troubled countries. Portugal is in bailout mode, Italy received a credit downgrade, and Spain has a new ruling party that could derail its own austerity measures or uncover more debt problems.

Goldman Sachs

also might have called a bottom in commodities after it revised its outlook upwards for oil. Although, its gold and silver price targets were unchanged at $1,690 and $28.20, respectively.

Morgan Stanley

increased its oil price forecast by 20%. The bullish sentiment helped drag all commodities higher.

A wild card for all commodities, however, is growth in China. Goldman slashed China's 2011 and 2012 growth forecast to 9.4% and 9.2%, respectively. If the country slows too much there won't be enough money to buy goods, from commodities the country actually consumes to gold, which is bought as a store of wealth. Goldman said China's inflation will fall to 4.7% in 2011, it is currently at 5.3%, and to 3% in 2012.

Slowing inflation would prevent the central bank from raising interest rates, which would be good for gold, but could also diminish gold's attractiveness as a safe-haven investment.

Jeff Clark, senior precious metals analyst at Casey Research, thinks that China will be forced to buy loads of gold and silver. Clark thinks that later in this decade the IMF will introduce a basket of currencies, which will become the world's official reserve currency as the value of the dollar fizzles out. "After that, it would be the yuan."

Clark doesn't believe in a Chinese gold standard but does think the country will keep buying the precious metals to beef up its purchasing power and at some point will ditch dollars. "China is trying to diversify their way out ...

by buying gold and buying all their own production

of gold." Clark thinks silver might hit its inflation adjusted high of $120 but that gold could actually break $5,000 an ounce.

Short term, however, Clark sees more downside for gold. "The average correction for silver is 19%, gold's 12% and we've only had a 3%-4.5% correction in gold ... It could easily fall further." Silver has corrected more than 30%, above Clark's estimated average.

Clark thinks the end of the bull market is at least three years out and that the "real issue is where is the bottom of the dollar." Although the dollar and gold only move inversely 32% of the time, according to

Standard & Poor's

, many experts believe gold's bull market since 2008 is primarily due to currency debasement, triggered when central banks printed their way out of the financial crisis, and that investors are opting for gold as protection against weakening paper money.

Gold mining stocks

were popping.

Kinross Gold

(KGC) - Get Report

was up 2.43% at $15.16 while

Yamana Gold

(AUY) - Get Report

was gaining 2.59% to $12.28. Other gold stocks,

Agnico-Eagle

(AEM) - Get Report

and

Eldorado Gold

(EGO) - Get Report

were trading at $63.89 and $15.84, respectively.

--

Written by Alix Steel in

New York.

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Alix Steel

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