By April H. Lee, MarketWatch NEW YORK (MarketWatch) -- Gold rose Wednesday as the U.S. trade deficit widened to a record 21-month high in June, rekindling fears that the economic recovery is faltering. Gold for December delivery rose $9.50, or 0.8%, to $1,207.10 an ounce on the Comex division of the New York Mercantile Exchange. U.S. stocks opened sharply lower on the news, which comes on the heels of warnings from the Federal Reserve that "the pace of the economic recovery is likely to be more modest in the near-term than had been anticipated." Fed officials also announced it will reinvest debt to prop up liquidity in the markets. The small move was part of the effort to exhibit central-bank concern about the U.S. recovery, which many analysts expected, and also added to demand for gold's safe-haven appeal. Read more about the Fed's decision here. But bigger gains for gold were being capped by a rising U.S. dollar. The dollar index (DXY 81.87, +1.07, +1.32%) , which compares the U.S. unit to a basket of six currencies, added 1.4% to 81.90 early Wednesday. The rise in the dollar is expected to be short-lived, analysts at Commerzbank said in a note Wednesday. "This expansive monetary policy measure should have a somewhat negative impact on the U.S. dollar in the medium- to long-term. This should in turn support the gold price," they said. "Therefore, we continue to act on the assumption of an increasing gold price in the medium- to long-term."

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