adminover negotiations on raising the US debt ceiling supported interest in the metal as a safe store of value.
The metal remained well off the record highs it hit earlier this week, however, as European leaders’ agreement of a rescue package for Greece boosted appetite for assets seen as higher risk, like stocks, at the metal’s expense.
Spot gold was up 0,5 percent at US$1 595,65 an ounce, and has risen 12 percent so far this year.
“There could be more of a correction if this crisis is really calming down, but it is too early to say that all is going to be well,” said Peter Fertig, a consultant at Quantitative Commodity Research.
“Don’t forget that even if there is now less need to invest in gold as a safe haven from European investors, you still have the debt situation in the United States, where the debt ceiling has to be lifted.”
Prices rose as high as US$1 609,51 an ounce last Tuesday on concerns that the debt crisis that engulfed Greece would spread to larger eurozone economies like Italy and Spain, but it failed to hold the US$1 600 an ounce level after a rescue deal was struck.
An emergency summit of leaders of the 17-nation bloc pledged to conduct a second bailout of Greece with an extra US$157 billion of government money, plus a contribution by private sector bondholders.
The euro rebounded from recent lows on the news, rising to a two-week high versus the dollar last Friday, while European shares rose. Oil prices also firmed as the package helped offset weak data from China.
Assets typically seen as safe havens suffered, however, with the Swiss franc falling 1 percent versus the euro in early trade while German bond futures slid.
But these short-term moves notwithstanding, expectations are high that the eurozone’s financial problems may persist.
“While last week’s agreement was as comprehensive as it could possible be, many legal and political issues need to be ironed out and the crisis is far from solved,” said Swiss bank UBS in a note.
“Although gold could lose steam in the short term, Europe will remain a primary catalyst for further gains over the medium term. That gold hasn’t reacted to any great extent suggests that many investors are not fully convinced by developments.”
In Washington, efforts to avoid a US default are set to enter a critical stage, with President Barack Obama and top lawmakers engaged in a sometimes chaotic drive to strike a sweeping deficit-reduction deal.
Negotiators have struggled to agree on terms for raising the government’s US$14,3 trillion debt ceiling. If it fails to do so by an August 2 deadline, the world’s biggest economy would be unable to pay all of its bills.
Demand for physical gold in major consumer India was light, meanwhile, as buyers took to the sidelines, awaiting further clarity on price direction. “Clients are waiting for prices to break on either side,” said a Singapore-based dealer.
Interest in gold-backed exchange-traded funds was also light, with holdings of the largest, New York’s SPDR Gold Trust , easing 0,3 percent.
Among other precious metals, silver was bid at US$39,66 an ounce against US$39,28, having tracked gold up to 2-1/2 month highs earlier this week.
“Recovering industrial demand due to stronger global economic growth anticipated for 2011 should be the key driving factor which will see silver outperforming gold,” said Credit Agricole in a note.
“Investor appetite, though, should still be the key driver of price strength, as investors view silver to be in a win-win situation under most scenarios – tracking gold higher on safe haven flows and also rallying in line with the rest of the industrial metals complex.”
Platinum was at US$1 786,24 an ounce versus US$1 781, and palladium at US$803,25 an ounce against US$805,47. – Reuters.
Online Reporter