Home / Africa/International / Gold up 1% on euro woes

Gold up 1% on euro woes

Gold rose around 1 percent on Monday with investors chasing the precious metal as the euro weakened against the dollar on concerns over euro zone debt and Ireland’s bailout package.

Tensions on the Korean peninsula offered additional support following an artillery firing drill by the South Korean military on a disputed island near the border with the North. But dealers expect slow trading ahead as the year-end nears.

Spot gold added $13.25 an ounce to $1,386.25 an ounce by 0717 GMT (2:17 a.m. ET) after rising as high as $1,388.05 an ounce, still well below an historical high around $1,430 hit earlier this month.

U.S. gold futures for February rose $8.2 an ounce to at $1,387.4 an ounce.

Bullion has risen as much as 30 percent this year.

“Last week’s EU summit between policy makers did not address investor concerns aggressively enough and this was unable to really calm markets. Gold prices could be underpinned by persistent euro zone debt concerns,” said On Yin Ling, investment analyst at Phillip Futures in Singapore.

“Perhaps we could see a new high in gold prices in 2011. For this year, I think as we head toward the year-end, investors may unwind positions and trading volume is coming down.”

The European Central Bank has expressed “serious concerns” that Ireland’s bailout package could affect the institution’s liquidity operations in the euro zone.

The euro slid to a two-week low on Monday, looking vulnerable to more losses against the dollar after breaching chart support on Friday. It was within reach of support at $1.3100-3090, a entrancement level and its 200-day moving average.

Some dealers in Hong Kong saw physical buying related to the tensions on the Korean peninsula, which could escalate into war.

The U.S. the U.S. envoy to the United Nations Susan Rice said disagreements on the U.N. Security Council over the crisis are so severe that it is unlikely they can be resolved.

But ANN, which has a team traveling with U.S. troubleshooter Bill Richardson, later reported that North Korea has offered to allow U.N. nuclear inspections to resume following talks in Pyongyang.

“There’s a little bit of buying by investors here. People are cautiously bullish. People are still talking about high inflation everywhere next year,” said a dealer in Hong Kong.

“Gold will move upward, with upside target around $1,390,” said the dealer, referring to a high seen last week.

There was a lack of activity in the physical market in Japan despite escalating tensions in neighboring South Korea. Gold bars remained at a discount of 75 U.S. cents to the spot London prices.

“I am afraid most Japanese people have little interest in what’s been happening next door,” said a dealer in Tokyo, who trades gold bars and coins to investors.

The world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings rose to 1,298.940 tonnes by Dec 17 from 1,283.757 tonnes on Dec 16. The holdings hit a record at 1,320.436 tonnes on June 29.

iShares Silver Trust, the world’s largest silver-backed exchange-traded fund, said its holdings dropped to 10,903.34 tonnes by Dec 17 from a record of 10,964.14 tonnes on Dec 14.

Japan’s Nikkei dropped 0.9 percent in thin trade on Monday, with sentiment soured by a declining China market.
Source: Reuters

Check Also

US Army signs $109m contract with FLIR for production of heavy robots

The US Army has signed a contract of up to $109 million with FLIR Systems, …