Gold rises above $1,070 on euro rally, Greece

By Frank Tang and Jan Harvey

NEW YORK/LONDON (BestGrowthStock) – Gold climbed above $1,070 an ounce on Tuesday, gaining 1 percent on improving economic sentiment as the euro rose after reports of a possible European bailout for debt-stricken Greece.

News that China’s biggest sovereign wealth fund has invested in gold also encouraged bullion investors.

Mihir Dange, a COMEX gold floor trader, said big moves in the euro/dollar and the equities market could easily send gold prices out of its trading range, increasing price volatility.

“Most of the trading right now is a short-covering rally. Until it gets back above $1,100, we can’t say for sure that we are back into a bull market,” Dange said.

Spot gold hit a session high of $1,083.05 an ounce and was last at $1,076.10 an ounce at 2:52 p.m. EST (1952 GMT), against $1,062.80 late in New York on Monday. Late last week it fell to a three-month low at $1,043.75 as the euro tumbled.

U.S. gold futures for April delivery on the COMEX division of the New York Mercantile Exchange settled up $11 at $1,077.20 an ounce.

The euro rose against the dollar, on track for its best one-day gain since November, after Reuters reported that euro zone governments have decided in principle to help Greece.

However, a spokesman for the German government later said reports that the euro zone has made a decision to aid Greece were “unfounded.”

“The market is looking for upside potential on euro-dollar given the record short positions in the euro,” said Saxo Bank senior manager Ole Hansen. “Gold… is in a much stronger position after the wash out on Friday.”

News that European Central Bank President Jean-Claude Trichet was leaving a meeting of central bankers in Sydney early to attend a European Council meeting on February 11 prompted speculation a plan was being discussed.

If these issues are successfully addressed, it is likely to boost the euro, which in turn should help gold.

Analysts said the dollar, which has rallied due to euro-zone’s problems, may slip later in the year.

“The issue of sovereign risk, which is currently working in the dollar’s favor and against the euro and therefore gold, could come back to haunt the dollar,” HSBC said in a note.

CIC DISCLOSES STAKES IN GOLD

A Reuters poll on Tuesday found only a one in four chance that Greece may have to seek a bailout this year to put its public finances back on track.

China Investment Corp (Read more about U.S. companies investment into China) (CIC.UL: ), the Asian giant’s $300 billion sovereign wealth fund, said it had invested in the gold sector, including a $155.6 million in New York’s SPDR Gold Trust.

Among other precious metals, silver was at $15.40 an ounce against $14.98, tracking gold higher. Platinum was at $1,501.50 an ounce against $1,472, while palladium was at $415 against $404.

News that the U.S. unit of ETF Securities Ltd. planning to start a precious metals basket trust lifted investment demand in platinum group metals.

Investment Research

(Reporting by Frank Tang and Jan Harvey; Editing by David Gregorio)

Gold rises above $1,070 on euro rally, Greece