Energy Rally Juices Gold

Updated from 2:32 p.m. EST

Gold overcame earlier selling pressure and rallied to a higher close after energy prices turned around.

April-dated contracts for bullion added $2.30 to close at $654.50 an ounce on the Comex division of the Nymex. Open interest in the April contract has now grown to 11.2 million ounces, edging out the February-dated instruments as the benchmark.

Open interest in the February futures recently stood at 10.8 million ounces and will quickly taper off as traders roll their positions forward.

The bullion exchange-traded funds followed the futures prices higher, with the iShares Comex Gold Trust (IAU Quote) and the streetTracks Gold Shares (GLD Quote) each up fractionally.

For much of the session, prices traded down following Tuesday's spike of almost $12, but a late-day surge pushed the gold into positive territory.

Helping the charge was action in the energy markets. On the Nymex, oil prices, which were also weaker for most of the day, staged a minor recovery. Crude prices closed up 33 cents at $55.37 a barrel. Gold sometimes trades in tandem with crude, which is seen as a driver of inflation. Some investors buy gold as a hedge against a generally rising price level.

But longer term, the gold bulls have their hopes set on a weaker greenback.

"Fundamentally, the trigger for higher prices is that the dollar is starting to turn lower again in the medium-term," which should add to the bullish case for bullion, says Joe Foster, gold strategist at money management firm Van Eck in New York.