Gold Prices Pop on Fear

NEW YORK (TheStreet ) -- Gold prices rose double digits Thursday as investors opted out of stocks amid weak economic data and the end of the second quarter.

Gold for August delivery settled $11.10 higher to $1,245.90 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,249.50 and as low as $1,228. The U.S. dollar index was losing 0.02% to $85.76 while the euro was adding 0.22% lower to $1.23 vs. the dollar. The spot gold price Thursday was rising more than $3, according to Kitco's gold index. Spot gold also rose double digits throughout the day but lost some steam in late trading.

Gold prices reversed earlier losses to close near record highs as any hopes of a risk trade died. Initial jobless claims last week fell slightly to 457,000, but the persistently high number underscores the fragility of the U.S. economic recovery and dampens any investor optimism. Investors are also waiting for the final form of the financial regulation bill, which should be finished late this evenng.

The yield on 10-year Treasury bonds was at 3.10% as investors rotated into the U.S. dollar. A lower yield means that Treasury doesn't have to raise interest rates to entice investors to lend money to the U.S. Investors seemed torn between gold and the U.S. dollar and which is the safest place to put their money as the two assets typically move in an inverse correlation.

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Typically, a stronger U.S. dollar hurts gold, as the dollar-backed commodity becomes more expensive to buy in other currencies. Gold had bucked its inverse correlation to the U.S. dollar as the European debt crisis exploded, as both were viewed as safe-haven assets.

The U.S. dollar could be more appealing for investors over the short term because it's the world's reserve currency and seems like the most stable fiat currency. However, many analysts believe this trend will be short lived as the U.S. $13 trillion debt price tag catches up to the country.

"One view is that if debt is going to remain a serious issue for some time to come and that [if] governments are going to have to keep monetary policy very easy for some time ... then I think that gold prices will likely move a lot higher," says Nicholas Brooks, head of research and investment strategy for ETF Securities.