NEW YORK (

TheStreet

) --

Gold prices

clawed higher Tuesday as the U.S. dollar fell on hopes that Europe will make progress on stemming its debt crisis.

Gold for February delivery added $4.40 to close at $1,718.90 an ounce at the Comex division of the New York Mercantile Exchange. The

gold price

has traded as high as $1,721.70 and as low as $1,702.70 an ounce while the spot price was up $9, according to Kitco's gold index.

Silver prices

lost 29 cents to close at $31.95 an ounce while the

U.S. dollar index

was down 0.23% at $78.99.

Gold prices held after a monster rally Monday that pushed prices up 1.5%. Helping gold today was also a stronger U.S. stock market, leaving less need for investors to dump gold for cash.

Vote: Where will gold prices finish in 2011?

The euro, and consequently gold, shook off a mixed Italian debt auction. The country was able to raise the money it needed but had to pay up to do so, with the 10 year yield soaring to 7.65% versus 6% a month ago. Investors were also eying a eurozone finance ministers meeting today that will address beefing up the firepower of the region's bailout fund, as well as Greece's next 8 billion euro chunk of bailout money needed in early December.

Federal Reserve Vice-Chairman Janet Yellen, who is a voting member, opened the door for more quantitative easing, saying in prepared remarks that the "scope remains" to either tie interest rates to benchmarks providing more clarity to the market or by buying more assets.

"Further pockets of bargain hunting and safe-haven related buying will help support the gold in the coming sessions," says James Moore, research analyst at FastMarkets.com, "but as a whole we expect the recent trend of mixed volatile trade to continue with the metals vulnerable to further bouts of cash generating related long liquidation."

Indeed the latest commitment of traders report for the week ending November 22nd was mixed. On the one hand, total long positions fell by almost 13,000 contracts which showed profit taking and the need for cash, while total short positions decreased by 26,000 contracts which means a portion of gold's recent rally can be attributed to short covering.

Phil Streible, senior market strategist at R.J. O'Brien, says short covering could also be continuing. "$1,700 was a key level of resistance and we blew through that and that is where short covering intensified." Traders in essence borrow shares and sell them at one price, hope the price goes lower then buy back those shares, return them to the broker and pocket the difference. When the price rallies instead, traders then must scramble to buy back those shares at the lowest price they can find in order to protect profits, which often adds to buying pressure.

"If we can get a two day close over $1,720 or we can take out $1,750, it's going to start a new technical buy pattern," says Streible meaning that the recent rally won't just have been short covering, "as long as prices can hold these levels we will probably continue higher."

Other

gold mining stocks

were mixed Tuesday.

Kinross Gold

(KGC) - Get Report

was down 0.31% to $13.02 while

Randgold Resources

(GOLD) - Get Report

was jumping more than 8%, reversing its losses from Monday on an upgrade to buy from Investec Securities. Other gold stocks,

Eldorado Gold

(EGO) - Get Report

and

Yamana Gold

(AUY) - Get Report

were trading at $16.88 and $15.68, respectively.

--

Written by Alix Steel in

New York.

>To contact the writer of this article, click here:

Alix Steel

.

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