Gold and silver climbed along with the stock market on the first trading day of the New Year after lawmakers hammered out a deal to avoid the fiscal cliff, prompting investors to embrace more risk. Precious metals’ strength coincided with the U.S. dollar and commodity currencies, such as the Canadian and Australian dollars.

Front-month gold futures prices rose 0.74% to $1,688.60 an ounce.

SPDR Gold Shares (ARCA:GLD ), tracking a tenth of an ounce of bullion, gapped up 0.83% to 163.37. It rallied off of its key 200-day moving average but appeared to be hitting resistance as it approaches the 50-day moving average. This suggests it’s in a weak uptrend.

Market Vectors Gold Miners ETF (ARCA:GDX ) jumped 1.43% to 47.05. It’s struggling to regain the 200-day moving average, which is bearish.

Gold bulls contend precious metals are rising on the expectation that the fiscal cliff deal will continue to inflate U.S. debt and devalue the greenback.

The deal they struck was shocking. We will add $4 trillion more in debt with no real budget cuts, Terry Sacka, chief strategist at Cornerstone Asset Metals in Palm Beach Gardens, Fla. said in an email. This along with the Fed printing a trillion over the next year of new money makes the outlook clear: The U.S. will continue to debase the dollar which will certainly lead to higher gold and silver prices.

Once gold can regain $1,700 (an ounce), expect to see the market heat up again, Peter Spina, president of Goldseek.com, wrote in an email.

With appetite for buying our debt internationally decreasing, the Federal Reserve’s dollars-for-debt program provides assurances that the fiscal problems are to only grow, Spina added. The real question in gold and silver investors is not the fiscal cliff, but ultimately fiscal solvency. This will continue to drive buying into gold and silver.

Traders also attributed the rally to short-covering in which traders that sold short commodities to profit from falling prices have to buy back their positions to close them. This creates demand.

Gold may be rallying on the fiscal cliff deal, but the rally will be short lived as precious metals will fall to new lows, according to David Hunter, chief market strategist at KCCI, a brokerage firm in New York City.

I believe we will see a global deflationary downturn in 2013 that will cause gold to plunge to $1,000 to $1,100 and silver to the low teens. Any near-term strength in the metals should be viewed as a selling opportunity, he wrote in an email.