Gold Prices Book Slight Gains (Update 1)

Updated from 10:18 a.m. EDT with settlement prices

NEW YORK ( TheStreet) -- Gold prices rose Tuesday after ratings agency Moody's warned of a downgrade of the U.S. government debt rating should Congress fail to avoid the so-called fiscal cliff.

Gold for December delivery rose $3.10 to settle at $1,734.90 an ounce at the Comex division of the New York Mercantile Exchange. The gold price traded as high as $1,740.50 and as low as $1,728 an ounce, while the spot price was up $8.40, according to Kitco's gold index.

"You're seeing the dollar index come off when that news broke, and momentum in gold, silver and euro currency all pushed up," said Phil Streible, senior commodities broker at RJO Futures.

Silver prices for December delivery fell 7 cents to settle at $33.57 an ounce, while the U.S. dollar index was dipping 0.67% to $79.86.

Moody's said early Tuesday the federal government's triple-A rating would be in jeopardy if the United States did not reach a budget deal that would determine the fate of the expiring Bush tax cuts, the payroll tax, the Alternative Minimum Tax and critical spending cuts. An inability by Congress to address these issues, many economists have argued, could push the country back into recession.

Gold's slight upward tick suggested investors have continued to look to the yellow metal as a safe haven, despite a recent surge in prices that encouraged profit-taking in Monday's session.

Looking ahead, traders have an eye on Thursday's resolution of the Federal Reserve's latest policy meeting. Most Fed watchers are expecting the central bank to announce a new asset purchase program and possibly extend into 2015 its promise to keep interest rates at the current historic lows.

Fed Chairman Ben Bernanke said two weeks ago at the Jackson Hole, Wyo., economic summit that he was gravely concerned about the labor market, and that QE3 could be near.

Investors are also anticipating the German Constitutional Court's decision on Wednesday as to whether it would back the European Central Bank's new bond-buying program, which ECB President Mario Draghi disclosed last week.

Gold mining stocks were mostly higher on Tuesday. Eldorado Gold ( EGO) and AngloGold Ashanti ( AU) were among the biggest gainers, as shares of the companies were up 3.3% and 1.6%, respectively.

Among other mining stocks, Gold Fields ( GFI) was down 0.31%, while Yamana Gold ( AUY) was down 1.2%. Kinross Gold ( KGC) was rising 0.64%. -- Written by Joe Deaux in New York.

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