Benchmark June gold rallied nearly four per cent to a two-week high of$291.50 an ounce in early afternoon trade, reversing early slippage andclearing out some of the bearishness that pushed prices to six-month lowslast week.

The flight into gold, historically seen as a store of value when financialmarkets are in turmoil, came as another day of technology share sellingknocked the Nasdaq down 574 points at one stage.

The tech plunge dragged the Dow Jones Industrial Average down 504 points, aday after it rallied 300 points as steady earners came back to favour. TheNasdaq fell 349 points on Monday.

The June contract ended at $286.60 an ounce, up $6.20 and above a low of$278.40. Spot bullion closed at $284.00/5.00, up from Monday's close at$277.70/8.70 and the late London fix at $276.85.

``It looks like everyone is kind of panicked here,'' saidCarlosPerez-Santalla of Hudson River Futures. ``Gold did not start runningup until the Dow went negative. Now that the Dow is accelerating its downmove we're seeing more and more buyers come in.''

Gold trimmed some gains once US stocks climbed off their lows. Atmidafternoon the Dow was only down 165 at 11,058. TheNasdaq was still off 269 points around $3,954.

Bullion also suffered disinvestment as the painful shake-out in thehighly-leveraged stock market triggered a chain reaction, forcing investorsto sell other assets to raise margin collateral for equity losses, analystssaid.

``Commodities are suffering from this,'' said head of futures research atMerrill Lynch, William O'Neill. ``We saw selling in the grains and itderailed the gold rally also. Crude oil and commodities in general sold offbecause there is a liquidity crunch.''

But O'Neill was heartened by gold's immediate reaction to Wall Street'srecent problems, noting it had been some time since such a flight to qualitywas aimed at hitherto unloved bullion.

Bullion hit 20-year lows last August on gloominess over central bank plansto cut gold from from reserves, downgrading its status as a monetary assetafter years of dormant inflation. The bearishness still hangs over themarket.

Gold opened modestly weaker from Monday's news the Austrian National Bankrecently sold 30 tonnes of gold and plans sales of 60 more tonnes. It fell3.7 per cent last week on rumours that the Bank of France could also startselling gold reserves.

The Austrian announcement came as the market, growing acclimatised tocentral bank sales, is readying for the sixth 25-tonne British auction inMay and possibly the first of Switzerland's planned, butyet-to-be-scheduled, sales later this month.

-- Reuters