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NEW YORK ( TheStreet ) -- Gold prices rallied Wednesday, shaking off Tuesday's selloff as bargain hunters jumped into the market. Gold for April delivery added $3.30 to close at $1,396.10 an ounce at the Comex division of the New York Mercantile Exchange. Although the gold price settled under $1,400 an ounce, a psychologically important level for investors, and has traded as high as $1,406.60. The spot gold price was relatively flat, according to Kitco's gold index.
Silver prices participated in the relief rally, settled up 35 cents to $34.47 an ounce. Silver also saw nearly a 5% selloff Tuesday but still held above the $33.50 level. Silver is appealing to investors not only for its safe haven status but also for its use as an industrial metal, which will be pivotal to rebuilding Japan. GLD), which has shed 5 tons in the last week. Safe haven buying is coming back into the market after Bahrain declare martial law in the country and three more people died as protesters clashed with police. Iran condemned the military support of other Arab nations including Saudi Arabia, which has now sent 1,000 troops into the region.
Will Rhind, head of U.S. operations for ETF Securities, says he thinks the panic selling in gold is done for now and that safe haven buying will continue to dominate the market. "We've seen no outflows out of our gold products here in the U.S. We are seeing some inflows into silver." Most analysts are calling for more volatility in gold and silver despite the Nikkei's 5.7% rally and as the Dow Jones Industrial Average contends with more triple digit losses on the news that European Union Energy Chief Gunther Oettinger said Japan's nuclear plant crisis is "out of control." Broad equity selloffs will increase investors' need for cash. Gold will also take its direction from February's consumer price index set to be released Thursday. The precursor, the producer price index, doubled to 1.6% in February with food prices rising 3.9% and energy prices up 3.3% year over year. The U.S. only counts core prices, excluding food and energy, in the main inflation reading, which is up 1.8% over the last 12 months. The CPI number tends to be a mixed bag for gold. A high inflation reading Thursday could prompt safe haven buying into gold as the U.S. dollar becomes worth less over the long term, but might also force the Fed's hand in raising rates or altering its bond buying program. A flat or subdued reading would keep a flow of cheap money in the system but traders using gold as an inflation hedge could dump the metal. Gold mining stocks, a risky but profitable way to buy gold, were slipping. Yamana Gold ( AUY) was falling 3.35% at $11.84 while Harmony Gold ( HMY) was down 2.93% to $11.93. New Gold ( NGD) was trading 1.47% lower at $9.40. Shares of Eldorado Gold ( EGO) were 0.46% higher at $15.25 on the news the fact the miner said mineral resources and gold reserves increased by 14% and 24%, respectively, by the end of the fourth-quarter 2010.
-- Written by Alix Steel in New York. >To contact the writer of this article, click here: Alix Steel. >To follow the writer on Twitter, go to http://twitter.com/adsteel. >To submit a news tip, send an email to: email@example.com.