Gold Prices Rise After Fed Official's Dovish Remarks (Update 1)

Updated from 11:02 a.m. EDT with settlement prices

NEW YORK ( TheStreet) -- Gold prices jumped Monday after Chicago Federal Reserve President Charles Evans suggested that the central bank should keep a loose monetary policy until the unemployment rate dips under 7%.

Gold for December delivery rose $9.40 to settle at $1,783.30 an ounce at the Comex division of the New York Mercantile Exchange. The gold price traded as high as $1,794.40 and as low as $1,765.70 an ounce, while the spot price was rising $4.50, according to Kitco's gold index.

"We saw it all aggressively move higher on Fed President Charlie Evans' interview on CNBC," said Phil Streible, senior commodities broker at RJO Futures. "It sparked a large surge in short covering, we saw silver prices move up."

Silver prices for December delivery rose 38 cents to settle at $34.95 an ounce, while the U.S. dollar index was falling 0.10% to $79.81.

Evans told CNBC that all the analyses of QE3 that he had seen suggested it would be effective and that inflation risks were minimal at this point.

Fed Chairman Ben Bernanke spoke Monday afternoon as well, and while his speech reiterated the central bank's commitment to ongoing stimulus until the U.S. economy is on solid footing, he also spoke of the significant headwinds that are out there, such as Europe's credit problems, and said QE3 alone was "no panacea" for the United States.

Gold prices leaped after the Fed announced QE3 as investors moved into the yellow metal as a hedge against possible inflation that could result from the new cash expected to flood into markets.

The uncertainty about Spain that weighed on gold prices for most of last week was somewhat allayed on Friday when the country's bank stress tests showed its capital needs were within the expected parameters of the European Financial Stability Facility.

Gold mining stocks were mostly higher Monday. Shares of Randgold Resources ( GOLD) closed up 3.2%, while shares of Agnico-Eagle Mines ( AEM) gained 1.6%.

Among other mining stocks, Kinross Gold ( KGC) was up 1.6%, and Newmont Mining ( NEM) fell 0.56%.

Gold ETF iShares Gold Trust ( IAU) was adding 0.12%.

-- Written by Joe Deaux in New York.

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