NEW YORK (TheStreet ) -- Gold prices were rising Tuesday as investors bought the metal as protection against Europe's debt crisis.
Gold for February delivery, now the most actively traded contract, was up $14.50 to $1,382 an ounce at the Comex division of the New York Mercantile Exchange. The gold price Tuesday has traded as high as $1,382 and as low as $1,364.
The U.S. dollar index was adding 0.73% to $81.43, a 10-week high, while the euro lost another 1.13% to $1.29 vs. the dollar. The spot gold price Tuesday was rising $17.20, according to Kitco's gold index.
Gold prices and the U.S. dollar were rising in a flight to safety. The euro broke below the 200-day moving average as investors continued to dump the currency on fears that Europe's debt woes will spread to Italy, Spain, Portugal and Belgium. Despite reassurances that only bonds issued after 2013 would be affected if an insolvent country needed a bailout, current bondholders were still worried they would be on the hook if a country took financial aid.
The amount of interest struggling countries have to pay to get a loan were rising across the board. The yield on the 10-year treasury bond in Portugal rose to 7.28% Monday, as the country sweetened the pot for investors, while the German bund was yielding 2.74%.
The Bank of Portugal wasn't helping the euro either, warning in its mid-year report that its inability to borrow cheaply from the debt market posed "serious challenges" to its financial system. The lack of money along with new capital rules from Basel III, in which banks are required to hold more money in their reserves to help protect against losses, "reinforce the recessionary pressures on economic activity."
The uncertainty in Europe was good for gold as investors opted for the safe-haven metal over "risky" paper currencies or volatile stocks. In typical safe-haven fashion, gold prices were up double digits but the U.S. dollar was also benefiting from safe-haven buying and the strong currency could temper gold's gains.
"If we can close above $1,380 that would change us from sideways to down to sideways to up," says Jeff Friedman, senior market strategist at Lind-Waldock. "If we have a pullback I am defiantly a buyer ... I am looking at $1,351 and $1,340 and definitely $1,325. I do not believe we are going to break $1,300 ... I think the low is in for the month of November and December."
