Gold rallies on euro gains, Greece debt fears

By Alonso Soto and Jan Harvey

NEW YORK/LONDON (BestGrowthStock) – Gold rallied to two-week highs on Tuesday as the euro recovered from recent hefty losses against the dollar and investors snapped up gold to hedge against debt default risks in Europe.

While sentiment for the euro remained shaky overall — a factor that would normally undermine dollar-denominated bullion — analysts said the precious metal would find support amid worries over the fiscal health of euro zone economies, chiefly Greece.

Those concerns helped send euro-priced gold to a record high of 819.07 euros an ounce.

“Gold is being used a hedge due to increased risks in Europe. And you also have a response to higher oil prices and rising tensions in the Middle East,” said Bart Melek, Global Commodity Strategist with BMO Nesbitt Burns in Toronto. “The euro is up and that is certainly a catalyst.”

Spot gold was bid at $1,118.80 an ounce at 4:04 p.m. EST (2104 GMT), against $1,100.50 late in New York on Monday. It earlier hit a high of $1,120.80.

U.S. gold futures for April delivery settled up $29.80, or 2.73 percent, at 1,119.80 an ounce, the highest level on a settlement basis since January 19.

The euro rallied against the dollar on Tuesday, marking its biggest one-day gain since July.

Gold has risen steadily this week as investors concerned by the fiscal health of a number of smaller euro zone countries, including Greece, Portugal and Spain, bought the metal as a hedge against currency market instability.

The bullion posted its biggest annual gain in three decades last year on the back of worries over currencies’ depreciation and expectations of long-term inflation as the world economy emerges from recession.

EURO REBOUNDS

As well as euro-denominated gold, gold priced in sterling and South African rand also rose to one-month highs. Gold’s current performance in dollar terms does not reflect the precious metal’s true strength, analysts said.

“International financial contagion remains a risk and the cost of insuring sovereign debt is rising for all countries internationally,” said bullion trader GoldCore in a note.

“As long as there remains the risk of the ignition of what is being called the global debt time bomb, it is hard to see how gold will not remain in strong demand.”

Among other commodities, oil prices rallied 3.9 percent to $77 a barrel, responding to the euro’s gains against the dollar and supported by tensions over pressure for more sanctions against Iran.

Elsewhere, holdings of the world’s largest gold-backed exchange-traded fund, New York’s SPDR Gold Trust, were steady on Monday, while gold demand in India, traditionally the world’s biggest consumer, retreated.

Silver was at $16.10 an ounce versus $15.52, having earlier touched a peak of $16.19, its strongest since February 4.

Platinum rose to $1,535 an ounce versus $1,512.50 and palladium at $430 versus $418.50.

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(Reporting by Alonso Soto; Editing by Lisa Shumaker)

Gold rallies on euro gains, Greece debt fears