NEW YORK (Dow Jones)--Gold futures rallied sharply on safe-haven buying Thursday but then pared those strong gains as equities firmed and the metal hit resistance. April gold rose $12 to settle at $914.20 after peaking at $926.30 an ounce on the Comex division of the New York Mercantile Exchange. Gold is having an "extreme problem" above $920, said Sterling Smith, vice president with FuturesOne. "It's almost like it has an allergy." The metal also began facing headwinds as the stock market firmed. Shortly after gold closed the Dow Jones Industrial Average was up 64.19 points at 8020.85. It is currently up 132 points at 8091. "Anytime there's stability in the stock market, that safe-haven buying dries up," Smith said. Gold is often considered a haven asset that could hold its value more so than other investments in times of economic or political uncertainty. It is also viewed as a hedge against inflation and as an alternative holding to the U.S. dollar. But if the metal can't hold above $920 for three days in a row, it "remains rather vulnerable," Smith said. "How long is it going to be before the bulls get tired?" Some of the safety purchasing in gold waned as participants see the U.S. Senate nearing a bailout plan, said Charles Nedoss, senior account manager and metals analyst with Peak Trading Group. "The risk aversion trade is abating somewhat," he said. Earlier, U.S. initial unemployment numbers "contributed to the surge in metals, as the nasty statistical reality was seen as dollar-negative at least in the short-term," Kitco Bullion Dealers analyst Jon Nadler said in a research note. First-time claims for state unemployment insurance reached 626,000 in the week ended Jan. 31, up 35,000 from the prior week. Continuing claims, an indication of the difficulty in finding a replacement job, increased to a record 4.79 million, according to the Labor Department. The stabilization in gold prices at recent "elevated" levels is coming as strong investor interest outweighs the generally stronger dollar, a Barclays Capital research note said. "Although a stronger dollar is less supportive for gold prices, past trends show it does not always result in declining gold prices," Barclays says. "Fears about the wider economy have fueled safe-haven buying and, in turn, sidelined currency movements." Silver futures rose with gold prices on safe-haven flows, and bargain hunting also boosted the gray metal, Smith said. But silver hit resistance around $12.90 and pared gains, settling at $12.75 an ounce, up 28 cents. Platinum and palladium futures also gained with gold as a safe-haven play. Nymex April platinum rose $12.30 to settle at $982 an ounce while March palladium on the exchange gained $4.20 to settle at $202.20 an ounce.

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