Gold Prices Settle Above $1,700

Gold prices soar to another record high Monday on safe haven appeal.

Author:: Andrea Tse
Publish date:: Aug 8, 2011 2:49 PM EDT

NEW YORK (TheStreet) -- Gold prices soared to another record high Monday as investors sought the yellow metal as a safe-haven asset amid the climate of uncertainty triggered by the historic downgrade of the U.S. credit rating by Standard & Poor's.

Gold futures for December delivery rose $61.40 to settle at $1,713.20 after soaring to an all-time high of $1,721.90 an ounce at the Comex division of the New York Mercantile Exchange. The gold price traded as high as $1,721.90 and as low as $1,681.70, while the spot gold price rose $53.60 to $1,717, according to Kitco's gold index.

"Slow growth in the U.S. and eurozone debt problems are likely to keep prices underpinned and gold attractive," Phillip Futures analyst Ong Yi Ling said in a client note.

"Another round of quantitative easing from the

Federal Reserve

cannot be ruled out as well," she added. News of more government stimulus would likely trigger more gold rallies down the road.

Ling has raised her price target for gold in 2011 to $1,800 an ounce.

Silver prices

rose $1.02 to $39.34 an ounce. The

U.S. dollar index

was ticking up 0.1% to $74.68, while the euro was falling 0.5% to $1.4209 vs. the dollar.

Gold prices rallied as stock futures pointed to a steeply lower open Monday as investors sought safety after Standard & Poor's downgraded the U.S.'s credit rating

for the first time.

The ratings agency cut its rating on the U.S. government's debt to AA+ from AAA with a negative outlook after the close of trading on Friday. The ratings downgrade capped a week that saw U.S. equities lose 7% amid concerns about the global growth outlook.

Treasury Secretary Timothy Geithner said the move showed "terrible judgment."

Commerzbank Commodity Research analysts said that as long as the news stays negative, gold prices should sustain their momentum.

Net long positions in gold have widened to a record high of 228,800 contracts in the week leading up to Aug. 2, according to the latest Commodity Futures Trading Commission data.

"As the CFTC data show, the price of gold is currently being strongly driven by speculative financial investors ... The price rally since then suggests that bets on rising prices have been increased further," the Commerzbank analysts said in a morning letter to clients.

"While this means that correction potential from this side has build up in the medium term, this should not pose a problem as long as the news front remains that negative."

Gold mining stocks

and funds were advancing Monday.

SPDR Gold Trust

(GLD) - Get Report

was popping 3.4% to $167.32, while

Newmont Mining

(NEM) - Get Report

was rising 1.8% to $55.38.

NovaGold

(NG) - Get Report

was trading 2.5% higher at $9.27 and

Goldcorp.