Gold hits 5-month high on Greek aid uncertainty

By Frank Tang

NEW YORK/LONDON (BestGrowthStock) – Gold ended up on Monday but an earlier rally to five-month high ran out of steam, and the metal was underpinned by safe-haven demand as a record aid plan for Greece failed to quell wider concerns on a euro-zone debt crisis.

A Wall Street rally based on improved U.S. manufacturing data has partially offset skepticism to the 110 billion-euro ($146 billion) EU/IMF bailout for Greece, which prompted investors to switch funds into hard metals assets such as gold, traders said.

James Steel, chief commodities analyst at HSBC, said that more uncertainties about debt-laden Greece and worries that the crisis would spread to other euro members could support gold in thin trade. “That has been the key factor behind gold’s recent strength,” he added.

Analysts said that gold’s underlying strength could be shown by its defying the dollar’s strength against the euro, which fell to $1.32 due to doubts about Greece’s ability to implement budget cuts.

Spot gold rose to a 2010 high $1,187.41 an ounce, also firmest since December 4 earlier in the session. It was at $1,183.30 at 2:36 p.m. EDT (1836 GMT), up from $1,177.25 late in New York on Friday.

Gold’s appeal as an alternative to paper currencies can be seen as it hit record highs in euro, sterling and Swiss franc terms.

European markets (.FTEU3: ) contained a dose of skepticism and traded almost flat toward Greece’s news, even as Wall Street rose 1.5 percent on the manufacturing report, which also boosted the dollar.

“The financial aid package is only buying time. The long-term problems still exist. It also seems that market players had expected a larger package,” said Daniel Briesemann, commodity analyst at Commerzbank. There had been talk of a 120 billion euro ($159.8 billion) package before the weekend.


U.S. June gold futures also rose toward $1,190 an ounce in earlier trade, and the contract settled $2.60 higher at $1,183.30 an ounce. Silver took its lead from gold, firming to $18.80 from $18.59 on Friday.

Trading activity remained fairly thin on Monday with Britain, Japan, China and Thailand closed on Monday for public holidays.

Gold gained almost 6 percent in April, its biggest one-month rise since November, as the credit ratings downgrades of Greece, Spain and Portugal unleashed a wave of risk aversion, channeling money into gold.

On technical charts, gold is on a bullish trend toward $1,261 per ounce.[ID:nSGE64200T] Earlier in the session, prices were less than $50 away from record highs hit late last year at $1,226.10.

In other precious metals, platinum slipped to $1,724.00 from $1,739.50 quoted late on Friday in New York, while palladium also fell to $544.50 an ounce from $551.50.

PGM prices stayed lower due to industrial metals’ weakness, even as U.S. auto sales rose in April from recession-stunted results a year earlier, supported in part by incentives, led by Ford Motor Co (F.N: ) and Hyundai Motor Co (005380.KS: ).

The platinum group metals, used mainly to clean auto emissions, have benefited from expectations for auto sales to motor out of crisis mode this year.


(Additional Reporting by Veronica Brown in London and James Regan in Sydney; Editing by Lisa Shumaker)

Gold hits 5-month high on Greek aid uncertainty