????Gold rose $7 an ounce to $1,258, after a series of reports raised questions about banks' capital levels and their exposure to bonds issued by stressed nations such as Greece, Portugal, Ireland, Italy and Spain.

????Tuesday's rally takes the gold price up almost $100 an ounce from its midsummer low and just a few dollars from the June record of $1,260. It also confirms the warnings of gold bulls, who insisted during a mostly calm summer that gold's selloff would turn around once the financial markets had to deal with another crisis.

????But while the European bank crisis is in the headlines Tuesday, it mostly reminds investors of the grim bigger picture: A fragile recovery in which developed world governments struggle to rekindle growth without setting off alarms about their deteriorating finances.

????"The fear factor is what whips gold prices around," said Tom Winmill, who manages the $105 million Midas fund that invests in precious metals company stocks.

????The biggest fear, Winmill adds, is that policymakers such as Federal Reserve chief Ben Bernanke will debase the value of the dollar by putting more money in circulation to aid a weak recovery. He expects U.S. gross domestic product growth to average just 1%-2% over the next decade, as the economy strains under an enormous debt burden and rising taxes.

????Aggressive central bank action here and in Europe, together with the failure of Congress to confront never-ending U.S. overspending, point the way toward a sustained rise in gold prices for the balance of 2010 and beyond, Winmill said. He said that even with the tripling of gold prices over the past decade, it's still a good time to start a position in gold as a store of value.

????"You might call it the wallpaper factor," Winmill said, referring to the worry that the Fed's response to the recession will leave the dollar useful only for interior decorating purposes. "What we're looking at is kind of a slow-moving traffic accident."

????The late summer gold rally started when Bernanke pronounced the economic outlook "unusually uncertain" and another Fed official spoke of a possible need for the Fed to restart its purchases of Treasury bonds to prop up demand for goods and services. Winmill has been calling for gold to hit $1,400 by year-end.

????Despite the big numbers, gold remains more than $1,000 below its inflation-adjusted all-time high, reached in 1980. An ounce of gold fetched $873 three decades ago, at the height of the late 1970s inflation scare. Adjusted for inflation, the all-time high is $2,310.

????Our political leaders being who they are, though, that target seems to be well within reach.

????"We're going to see gold moving slowly higher till we some fiscal discipline in Washington," Winmill said.