Gold Prices Climb on Global Tensions (Update 2)

Updated from 11:27 a.m. EDT with settlement prices

NEW YORK ( TheStreet) -- Gold prices reversed previous-day losses Tuesday as tensions elevated in the Middle East and between China and Japan.

Gold for December delivery settled up $1.80 to $1,766.40 an ounce at the Comex division of the New York Mercantile Exchange. The gold price traded as high as $1,777.90 and as low as $1,764.20 an ounce, while the spot price was dipping 60 cents an ounce, according to Kitco's gold index.

"The saber-rattling that you've seen; there's saber-rattling, of course, in the Middle East, and now there was some saber-rattling between China and what happened with Japan," said George Gero, precious metals strategist at RBC Wealth Management. "When there's unrest, there's buying."

Gero added that Tuesday's buying was also a result of short-covering as the buying pushed the shorts to cover.

Silver prices for December delivery fell 4 cents to $33.95 an ounce, while the U.S. dollar index was up 0.03% to $79.57.

It was the first day silver had settled below $34 an ounce since the Federal Reserve implemented QE3 on Sept. 13.

President Barack Obama condemned anti-American protests that have spread across the Middle East in a speech to the United Nationals General Assembly on Tuesday. Violence that killed the U.S. ambassador to Libya renewed worries of greater protests in a region that had already frightened markets because of conflicts between Israel and Iran.

Japanese and Taiwanese ships traded water cannon shots at each other on Tuesday in a confrontation over a group of tiny islands in the East China Sea, according to reports. The Japanese government recently purchased the islands from private owners, but China and Taiwan have claimed the islands as their own.

Gold sold off on Monday as investors moved into U.S. dollars as a safe haven on reports that Germany and France were clashing over a timeline to introduce a banking union, and as reports emerged that Greece's budget shortfall was much greater than expected.

Gold and silver have enjoyed a recent upward move, bolstered by the Fed's QE3 program, but Phil Streible, a senior commodities broker at RJO Futures, said silver may soon take a hit.

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