Gold hits one-week high on fears over currencies

By Frank Tang and Jan Harvey

NEW YORK/LONDON (BestGrowthStock) – Gold rose above $1,090 an ounce on Thursday as investors turned to the metal as a hedge against currency volatilities after news that European governments agreed in principle to support heavily indebted Greece.

Bullion was boosted by choppy currency trade as the euro traded in a wide range from $1.38 to $1.35 due to investor disappointment with the lack of details regarding the EU deal to resolve fiscal problems in Greece.

Bruce Dunn, vice president of trading at New Jersey-based Auramet, said that gold was underpinned by the Greece bailout news and position-squaring ahead of a U.S. three-day weekend.

“There was a fair amount of short-covering. The moves have been so volatile lately that you just don’t know what is going to happen from one day to the next,” Dunn said.

U.S. market will be shut on Monday for the Presidents’ Day.

Gold had dropped $60 in a two-day sell-off late last week as heightened fiscal worries in Europe prompted risk aversion and technical weakness in the metal.

Spot gold was at $1,095.75 an ounce at 2:40 p.m. EST (1940 GMT), against $1,071.55 late in New York on Wednesday. Bullion hit a session high $1,097.75, the highest since February 4.

U.S. gold futures for April delivery on the COMEX division of the NYMEX settled up $18.40, or 1.7 percent, at

$1,094.70.

Gold benefited from fears over the outlook for paper currencies in general, said Simon Weeks, head of precious metals at the Bank of Nova Scotia.

“People don’t really want to be overexposed to dollars. They certainly don’t want to be overexposed to euros and so on, and to that extent gold is acting as a currency in its own right,” he said.

“So what you will find is even if the dollar strengthens, gold can strengthen as well. In non-U.S. dollar currencies, it is actually performing really well.”

Gold prices jumped about 2 percent in euro terms to a one-week high of 802.73 euros.

European leaders struck a deal to provide financial aid to Greece earlier on Thursday, though details of the package were not expected to be finalized until EU finance ministers meet early next week.

INVESTMENT DEMAND IN FOCUS

With jewelry demand still relatively soft, the market is heavily dependent on investment demand, which is chiefly subject to currency moves, for direction.

“Investment demand is likely to be the wild card, and we think once the dollar starts weakening again, which is our view ultimately, then gold should resume its longer-term uptrend,” said Tobias Merath, head of research at Credit Suisse.

On the supply side, South Africa’s statistics office said gold mine output fell 8.8 percent in December in volume terms. The republic was the world’s third-largest mine producer in 2008 with output of 233.3 tons.

Silver was at $15.69 an ounce against $15.18. Platinum was at $1,523.50 an ounce against $1,507, and palladium was at $419 against $411.50.

(Reporting by Frank Tang and Jan Harvey; Editing by Lisa Shumaker)

Gold hits one-week high on fears over currencies