Gold Prices Touch $1,200

NEW YORK (TheStreet ) -- Gold prices settled just below $1,200 Tuesday as bargain hunters bought gold as a safe haven asset, overshadowing investors' need for cash.

Gold for June delivery added $4 to $1,198 at the Comex division of the New York Mercantile Exchange. The gold price today has traded as high as $1,200.40 and as low as $1,185.20. The U.S. dollar index was adding 0.39% to $86.54 while the euro regained some ground and was losing 0.10% to $1.23 against the dollar. The spot gold price Tuesday was adding $5, according to Kitco's gold index.

Gold prices were rebounding from an overnight selloff as European debt issues and escalating tensions between North and South Korea dragged on Asian and European markets.

The Bank of Spain's takeover of regional bank Cajasur, as well as the news that four Spanish banks were merging to survive the financial crisis, triggered investor panic across Europe. The reactionary fear-driven moves underscored the fragility of the euro and European Union.

Korean Conflict Boosts Gold Prices

Asian markets were also suffering as North Korean leader Kim Jong II ordered his military be on combat alert status after investigations proved that North Korea was responsible for the March sinking of a South Korean ship, the Cheonan, in which 46 sailors were killed. The aggression is now being regarded as a possible act of war.

Global financial and political unrest sunk stocks, and investors were forced to sell gold positions to cover losses in early trading. Gold prices rallied by double digits Monday, almost reaching $1,200, marking one of the few investments that offered a substantial profit.

As investors absorbed more downside in U.S. equities, they bought gold as a safe haven investment. Gold futures contracts saw some volatility Tuesday as traders unwound and covered certain positions. On the flip side, the spot price of gold rose slightly faster than futures as investors opted for the physical metal over stocks and "paper" gold.

"Today's option expiration ... means overstocked traders even out by selling extra futures that were the result of options becoming futures," says George Gero, vice president of global futures at RBC Capital Markets. "The stock market may end [with] lower lows and lower highs next week ... we may see more profit-taking in metals."