NEW YORK ( TheStreet) -- Gold prices treaded water Tuesday amid technical trading and light volume ahead of the Christmas holiday. Gold for February delivery settled up $2.70 to $1,388.80 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,393 an as low as $1,381.40. The U.S. dollar index was adding 0.19% to $80.76 while the euro was down 0.24% to $1.30 vs. the dollar. The spot gold price was rising $2, according to Kitco's gold index. Gold prices might have started their long holiday weekend a little early this year as worries in the European Union, tension in the Koreas and end-of-year book- squaring did little to boost prices. "Prices are probably going to remain flat," says Phil Streible, senior market strategist at Lind-Waldock. "
But there's still a lot of investor buying, there's still a lot of questions around the eurozone ... so there is underlying support." Moody's Investors Service has been active of late when it comes to the eurozone nations, threatening a downgrade of Spain's debt as well as some of its banks and issuing a downgrade of five Irish banks on Monday. The ratings agency was busy again on Tuesday, placing Portugal on review for a possible downgrade, citing "longer-term economic vitality." Moody's also placed Greece's already slaughtered credit rating on watch negative. Although the credit markets have been worried about EU debt issues for a year, an official downgrade would make it even harder for the countries to raise capital through the debt markets. Portugal and Spain's long-term borrowing costs rose Monday to 6.6% and 5.55% respectively, as the countries had to pay up to entice investors to lend them money. Despite the worries, the euro was trading only slightly lower on comments from China Vice Premier Wang Qishan's that China backed efforts to the European debt crisis. Gold's modest rally on Monday doesn't look set to extend as investors chose to lock in profits for the end of the year and opted for stocks instead. George Gero, senior vice president at RBC Capital Markets, credited the rally to short-covering, "buying previously sold positions as open interest is not growing." Gero still sees $1,370 as a support area and $1,425 as resistance. "Typical year end evening out patterns," says Gero, "as short rally precedes short sell-off and recovery, keeping uptrend intact."
An explosive conflict between North and South Korea didn't materialize as North Korea backed off previous statements that it would retaliate after South Korea's military exercise off the coast of Yeonpyeong. Analysts thought that any immediate conflict could push prices up to $1,425, but without that crisis catalyst gold might just bump along at current levels. >> Video: What North and South Korea Mean for Gold Prices Lind-Waldock's Streible has been nibbling away at futures positions "to be positioned before the start of the year because I think right out of the gate I think funds and allocation models are going to start coming out and are going to be more heavily weighted towards metals." One interesting item to note was earnings from packaged food company ConAgra ( CAG). The company reported a 16% fall in profit in part because of rising commodity costs that the company couldn't pass on to the cash-strapped and discount-minded consumers. From the Federal Reserve's standpoint, inflation in the U.S. is too low with the last core Consumer Price Index reading for November pegging inflation up 0.6% vs. a year ago. But food companies are saying something different. ConAgra's CEO Gary Rodkin said "higher-than-planned inflation weighed on Consumer Foods' profits despite progress in overall unit market shares and volume." Rodkin also sees cost inflation accelerating. Gold is very attractive for investors in times of inflation because the metal retains more of its value as a store of wealth. Many long-term investors had been buying gold as a hedge against inflation, which, as of yet, hadn't materialized. Consistent reports from food providers like ConAgra might reignite this thesis for gold. Silver prices closed up 3 cents to $29.39 while copper added 7 cents to $4.27. Gold mining stocks, a risky but potentially profitable way to buy gold, were mixed. Freeport McMoRan Copper & Gold ( FCX) was up 1.96% at $116.28 while Kinross Gold ( KGC) was 0.49% lower at $18.33. Other gold stocks New Gold ( NGD) and Gold Fields ( GFI) were trading at $9.22 and $17.51, respectively. -- Written by Alix Steel in New York. >To contact the writer of this article, click here: Alix Steel.