Gold rises as euro firms ahead of EU summit

By Jan Harvey

LONDON (BestGrowthStock) – Gold firmed in Europe on Thursday as the euro recovered some lost ground against the dollar ahead of an EU summit later in the day, at which leaders are trying to agree on further action to tackle the region’s debt crisis.

Spot gold was bid at $1,383.30 an ounce at 1211 GMT, against $1,380.45 late in New York on Wednesday. U.S. gold futures for February delivery fell $2.40 to $1,383.80.

The single currency rose 0.2 percent versus the dollar but is still down nearly 7.5 percent so far this year after the crisis hit Ireland and Greece, and threatened to spread to Portugal and Spain.

While gold typically moves in the same direction as the single currency in the short term, jitters over the stability of the euro zone have helped lift the metal to a record $1,430.95 an ounce as investors bought it as a safe store of value.

Richcomm Global Services senior analyst Pradeep Unni said that while few surprises were expected from Thursday’s summit, “the market seems grasping to the fact that euro zone members are attempting to be more pro-active to yet another debt surprise.”

“Though fundamentally the euro is weak, this pro-activeness is adding to the gains in euro,” he said. “Gold may have to succumb to year-end profit-taking and laggardness, but the trend still seems to be pointing higher with a possibility of new highs being scaled as we step into the New Year.”

At Thursday’s summit EU leaders will discuss changing the bloc’s treaty to create a permanent crisis-resolution mechanism from 2013, and may look at enlarging their existing crisis fund.

EU officials are conscious that any failure to take decisive action could be interpreted as weakness, with the threat of further bond market fallout early next year. (GVD/EUR: )

“Should a clear and sustainable solution to the debt crisis not become more likely after the meeting, the uncertainty of market players should generally increase,” said Commerzbank.

“Although this would continue to weigh on the euro, gold could profit as a safe haven in contrast to other commodities.”

EURO FIRMS

The euro rose to a session high against the dollar after an auction of Spanish debt saw decent demand, but quickly gave up those gains after Spain had to pay higher costs to sell 10-year and 15-year bonds. (FRX/: )

European shares also firmed, although traders were cautious ahead of the meeting. Shrinking trading volumes in Asian stocks have been seen as a tell-tale sign that investors comfortable with their cash allocations are heading to the sidelines for the rest of the year. (MKTS/GLOB: ) (.EU: )

Holdings of the world’s largest gold-backed exchange-traded fund, New York’s SPDR Gold Trust, eased by another 0.6 tones on Wednesday, bringing their total outflows in December to date to 0.4 tones versus inflows of just over 7 tones in the same period of 2009. (GOL/SPDR: )

In India, the world’s largest consumer of the precious metal, gold buying slowed as the wedding season neared its end, shrugging off the impact of a firmer rupee, which makes dollar-priced gold cheaper for local buyers.

“Demand is slightly thin,” said a Mumbai-based dealer. “They would hardly come to buy until mid-January.”

Elsewhere silver was bid at $29.11 an ounce against $28.79, platinum was at $1,696.99 an ounce against $1,695.50 and palladium at $752 against $746.72.

Among other commodities, oil and most base metals prices eased amid nervousness ahead of the EU meeting. (O/R: ) (MET/L: )

New investments in U.S. commodity products and mutual funds hit three-month highs in November, Lipper data showed on Wednesday, while regulators mulled ways to limit excessive speculation in the sector.

(Editing by Sue Thomas)

Gold rises as euro firms ahead of EU summit