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Gold Prices Gain on Rising Uncertainty

NEW YORK ( TheStreet ) -- Gold prices rode fears over lingering uncertainty in Japan and the conflict in Libya higher Monday as safe haven buyers jumped into the market.

Gold for April delivery added $10.10 to settle at $1,426.40 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,435.10 and as low as $1,423.50. The spot gold price was rising $8.30, according to Kitco's gold index.

Gold prices rallied Monday but without a lot of oomph. "It becomes harder and harder as we seize higher prices for funds and for speculators alike to actually buy the high prices," says Brian Booth, senior market strategist for Lind-Waldock. Booth is convinced that gold will still head higher especially with bad headlines coming out of Japan and Libya, which will draw traders back into the gold market.

Gold did benefit Monday as investors assessed the current risk levels of the global economy. Investors were purchasing gold as protection against the continued uncertainty in Japan as well as U.N. airstrikes against Libya. The SPDR Gold Shares (GLD) added almost 10 tons of gold on Friday on renewed buying.

Gold and silver "could be poised for further gains as investors seek to diversify towards safe-haven asset types with a mix of fresh buying and short covering potentially leading gold [and] silver to retest recent highs," says James Moore, research analyst for FastMarkets.

"Gold is still the chosen haven for European and Far and Middle East investors," say George Gero, senior vice president at RBC Capital Markets, "but open interest has not grown either in gold or silver as gold barely is at 500,000 and silver is still under 135,000," which points to a lack of longs in the market.

Tepco has reconnected power to six of its dying reactors, which now have access to cooling measures. Smoke was reported near reactor number three and there are indications of high radiation levels in food and water near the plant.

Any food shortages will most likely force global food prices higher, something already crippling emerging market economies. Food Price Watch said that the World Bank's food price index grew "15% between October 2010 and January 2011 and is only 3% below its 2008 peak."

Any hints of inflation are typically good for gold prices as investors buy the hard asset as paper money becomes worth less. The real inflation worriers would have already bought gold as world governments staved off disaster by pumping money into the system in 2008/2009. But for traders and investors who missed that trade, they might be more apt to jump in.

Xinhua News Agency, China's state run newspaper, said Monday that the worry that inflation would be one of the biggest risks "facing the world economy ... has become a reality."
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