NEW YORK ( TheStreet) -- Gold prices were in free fall Thursday despite continued concerns about unrest in the Middle East and growing worries about Eurozone debt woes.

Gold for April delivery fell $17.10 to settle at $1,412.50 an ounce at the Comex division of the New York Mercantile Exchange. The gold price today has traded as high as $1,431.80 and as low as $1,403 while the spot gold price was losing more than $19, according to Kitco's gold index.

"If in fact gold does sink and break the $1,400 psychological level then, of course, we will be open to new discussions," says Jon Nadler, senior analyst at, who was looking to $1,415-$1,410 as a support level.

Silver prices settled down 98 cents to $35.06 after the metal settled at a 31-year high Wednesday of $36.04 an ounce. "People better get used to $1-$2 moves intra-day," argues Nadler.

Gold and silver may have been expected to move higher on safe haven buying, but instead were getting lumped in with a broad market selloff.

There were reports that Gadhafi loyalists bombed an oil field in Libya as fighting escalated. Moody's struck out at Eurozone nations again, this time downgrading Spain's credit rating one level to aa2 with a negative outlook citing worries over the country shoring up its banking system. Moody's cut Greece's credit rating Monday and downgraded 6 of its banks Wednesday.

EU leaders will meet on Friday to discuss making its bailout facility permanent as well as outlining rules for those countries seeking cash. Analysts now expect this agreement to be a watered-down version of what was expected as countries like Ireland and Greece, who have accepted bailout money, balk at high loan rates and steep deficit reductions complaining they are too punitive.

The Bank of England also left interest rates at 0.5%, which was expected, as the easy cheap money flow continues in the country even as inflation nears 4%.

The uncertainty and resurgence of fiscal woes in Europe weighed on the euro which was down 0.67% to $1.38 against the dollar. The dollar was rising against all major currencies. The U.S. dollar index was adding 0.73% to $77.27, which was weighing on gold and silver prices, as the dollar denominated metals become more expensive to buy in other currencies.

Gold and silver were also moving in tandem with oil, its most recent correlation, as supply fears retreated. There were also worries about China's economy slowing too fast as exports rose just 2.4% in February versus 38% in January. One explanation, however, could be China's New Year Holiday that began in February, which pushed export demand forward a month.

The knee-jerk reaction was that China was simply unable to keep buying commodities, goods and oil at the rate markets have come to expect. Could this lackluster buying spill over into the gold market? The fear is there, but the reality isn't. China imported 200 tons of gold in the first two months of 2011, the same amount it did for the first nine months of 2010. According to data from the World Gold Council, China consumed 579.5 tons of gold during 2010.

Another factor hurting gold prices Thursday was profit taking. Gold prices were up 3% since the beginning of the year, up 7.6% since February and reached a record settle of $1,437.50 last Wednesday, triggering profit taking and consolidation.

"I don't think gold breaks that $1,392, which was the key level of support .... two weeks ago," says Phil Streible, senior market strategist at Lind-Waldock, "$1,410 is another major support level ... if we take out $1,392 I think you really got to go to the sidelines."

Gold's safe haven identity could come into spotlight Friday as investors react to the "day of rage" planned in Saudi Arabia despite the government's attempts to bribe its citizens with food and money.

Nick Brooks, head of research and investment strategy for ETF Securities, says that the company's physically backed gold ETFs in Europe have actually been seeing a lot of inflows recently. "While our U.S. backed ETFs have been seeing inflows not nearly to the extent that we have been seeing in Europe .... The sovereign risk issues in peripheral Europe are coming back again."

Brooks estimates that the inflows are a mix of old investors buying back positions they sold in January as well as new investors looking for protection.

Gold mining stocks, a risky but potentially lucrative way to buy gold, were getting hammered. Yamana Gold ( AUY) was losing 2.13% at $12.64 while Harmony Gold ( HMY) was down 0.61% to $12.24. South African miners like Harmony were getting hurt less that the rest of the sector after Bloomberg reported that the region produced 15.1% more gold in January, the biggest increase in 30 years.

But just because production in the region is booming doesn't mean that the company's profits are. Graham Briggs, CEO of Harmony Gold, said at BMO Capital Market Global Metals and Mining conference last week that "this year is a break-even year with gold even where it is."

Mining in South Africa has problems. Gold mines there are underground, which cost more and are very labor intensive. In Harmony's case, it is a pure gold producer which means no nice silver and copper by-products to help offset the cost of mining an ounce of gold.

A high exchange rate is also a killer. Currently a single South African rand is equal to 0.1451 U.S. dollars so for those like Harmony who sell gold in dollars but pay for costs in rand, profit margins can get swallowed. The company produced 323,275 ounces of gold at cash costs of $979 an ounce.

Other gold stocks, New Gold ( NGD) and Gold Fields ( GFI) were trading lower at $10.19 and $17.28, respectively.

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-- Written by Alix Steel in New York.

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