Updated from 1:24 p.m. ET with settlement prices.

NEW YORK ( TheStreet) -- Gold prices popped on Monday as backwardation in October to December prices boosted the appeal of the yellow metal.

Gold for December delivery at the COMEX division of the New York Mercantile Exchange jumped $22 to settle at $1,334.20 an ounce. The October contract traded at $1,334.30 an ounce. The gold price traded as high as $1,343.70 and as low as $1,313.50 an ounce, while the spot price was adding $6.87.

" today's jumping gold price is the backwardation of the near-buy," said George Gero, precious metals strategist at RBC Capital Markets. "There seems to be demand for the physical."

Backwardation, a situation in which gold for the October contract is selling at a premium to the December contract, suggests that traders are eager to grab earlier delivery of the yellow metal. The preference for earlier delivery could mean some investors are seeing a tightening of supply.

The China Gold Association announced that gold demand totaled 706.3 tons in the first half of 2013, which was on pace to break total demand in 2012 of 832.2 tons, according to Commerzbank AG.

Silver prices for September delivery gained 93 cents to $21.34 an ounce and reached a seven-week high. The U.S. dollar index was up 0.32% to $81.38.

"I think silver is significantly undervalued; I think anything below $20 was a very good bargain if you had the money to get in and kind of hold on," Phil Streible, senior commodities broker at RJO Futures, said in an interview. Streible said silver's poorer performance in recent months relative to gold was due to the white precious metal's higher margin requirements and the larger volatility.

Gold mining stocks closed mostly higher on Monday. Shares of Newmont Mining ( NEM) led the top percentage gainers on the S&P 500 as shares jumped 4.7% to $30.90.

Among volume leaders, Barrick Gold ( ABX) tacked on 4.5% to $18.21.

Gold ETF SPDR Gold Trust ( GLD) added 1.8% to $129.15 a share, while iShares Gold Trust ( IAU) was up 1.9% to $12.99 share.

-- Written by Joe Deaux in New York.

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