Gold rises as EU jitters resurface

Paris between French and German leaders, at which they will try to thrash out a solution to the bloc’s debt crisis.
Poorly-received German and euro zone growth data stoked concerns the region may be far from recovering its economic footing, pushing both the euro and European shares lower, and boosting the appeal of so-called safe havens like gold and the Swiss franc.

Spot gold was up 0,8 percent at US$1 779,69 an ounce partially reversing a correction it began late last week after hitting a record US$1 813,79 tomorrow. It remains up 25 percent this year, driven by worries over US and eurozone debt.
“Equities pulled back today, the greenback bounced back up and Germany’s Q2 GDP was fairly disappointing,” said Andrey Kryuchenkov, an analyst at VTB Capital. “The broader market is still nervous and uncertain ahead of the Merkel/Sarkozy meeting today.”

“(If) risk sentiment does not get much worse we (will) consolidate here. Otherwise it’s back to US$1 795 and then US$1 800. As before, investors will be unwilling to liquidate.”
European shares fell more than 1 percent after German gross domestic product growth slowed more than expected in the second quarter, weighed by a negative trade balance, flagging consumption and weak construction investment.

The data pressured the euro from a three-week high versus the dollar, while German government bonds firmed as a tentative recovery in risk appetite soured.
Risk appetite was further dampened by a subsequent reading of euro zone GDP, which showed the eurozone economy grew less than forecast in the second quarter.
US gold futures for August delivery were up US$24,40 an ounce at US$1 782,40.

Gold priced in euros reversed three sessions of losses to rise 1,2 percent to 1,235.65 euros an ounce, below last week’s record 1 283,38 euros.
The largest gold fund players including hedge fund titan John Paulson stuck with their bullion bets in the second quarter, opting not to follow George Soros who further reduced his gold ETF holdings, data showed on Monday.

Outflows from the world’s largest gold-backed exchange-traded fund ceased on Monday, with its holdings remaining unchanged after a near 50-tonne decline last week.
Swiss bank UBS said in a note yesterday its latest Client Poll showed 60 percent of respondents expected gold to be trading above US$1 800 by year-end, and 32 percent saw prices attaining US$2 000 or higher.

“That a majority of respondents expects gold to end the year above current very-elevated levels suggests that the macroeconomic backdrop is expected to remain supportive, and that September will again bring traditionally strong seasonal physical demand,” the bank said in a note.
“Our physical sales to India picked up last week, and were the strongest since late June . . . That physical demand is resilient and scrap supply underwhelming . . . is providing strong fundamental support for gold.” – Reuters.