) --

Gold prices

closed in on $1,400 an ounce Wednesday as investors fled into the safe haven asset as protection against a eurozone debt crisis.

Gold for February delivery added $2.20 to $1,388.30 an ounce at the Comex division of the New York Mercantile Exchange. The gold price Wednesday has traded as high as $1,398.30 and as low as $1,383.


U.S. dollar index

was losing 0.77% to $80.66 while the euro stemmed losses and was rising 1.16% to $1.31 vs. the dollar. The spot gold price was up $1.40, according to Kitco's gold index.

Gold prices set their sights on $1,400 for the second time this year and reached new highs in euros as European sovereign debt fears heated up. The early morning rally fizzled out mid-day and prices ended relatively flat as the

Dow Jones Industrial Average

popped more than 250 points.

Gold soared 1.3% Tuesday and didn't seem to be slowing

as the euro hit a 10-week low against the dollar as investors worried Belgium, Portugal, Spain and Italy might be the next countries to need a bailout.

Standard & Poor's also put Portugal's debt rating on Watch Negative, and the country's short-term borrowing costs rose to over 5%. Portugal was able to complete a successful debt auction Wednesday, raising � million in 12-month notes, but the country had to raise the yield to 5.281% from 4.813% in order to entice lenders.

"Default speculation will continue to dominate sentiment in the coming days," says James Moore, analyst at "Short-term, bullion ... remains vulnerable to bouts of long liquidation ...

but Europe's debt problems ... are supportive to further price gains." Investors will turn their sights on Europe again Thursday as the

European Central Bank meets to discuss interest rates


Gold got some additional support Wednesday from a jump in risk appetite, which boosted the euro and hurt the dollar. The weaker dollar was helping gold's advance as it became less expensive to buy.

World-wide purchasing managers indices, which measure the health of the sector, came in higher than expected. China's November PMI rose to 55.2, France's rose to 57.9, Germany's fell slightly to 58.1, but any number over 50 indicates growth. Even eurozone PMI came in at 55.3, and the U.K's rose to 58.

Further boosting risk was the

ADP employment report

from the U.S., which said that 93,000 jobs were added in November, the largest gain in three years.

The release of the beige book, which will be used at the Fed's next FOMC meeting, showed that manufacturing activity and tourism slightly expanded in all 12 districts, and retail spending was gaining momentum. The good news led investors into stocks and to hold gold.

Scott Redler, chief strategic officer at, who trades the gold ETF

SPDR Gold Shares

(GLD) - Get Report

, sees gold prices between $1,600-$1,800 in 2011 and a solid floor between $1,310-$1,320 an ounce.

"I do see this channel that we've been in for a month, a month and half with the potential of a head-and-shoulders top formation, which right now we're in the right side of ... I am in tier one now

in the GLD." Redler has been waiting for a strong acceleration to adjust his position.

The combination of risk appetite and a weaker dollar also were helping silver and copper prices.

Silver prices

added 20 cents to $28.41 while copper settled 12 cents higher to $3.94.

Image placeholder title

Gold mining stocks

, a risky but profitable way to

buy gold

, were trading higher.

New Gold

(NGD) - Get Report

was up 1.17% to $9.49 while

Gold Fields

(GFI) - Get Report

was adding 1.32% at $16.91. Other gold stocks

Gammon Gold



Hecla Mining

(HL) - Get Report

were trading at $6.76 and $9.74, respectively.


Written by Alix Steel in New York.

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