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Business News/ Money / Personal-finance/  Gold firms in Europe as debt fears simmer
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Gold firms in Europe as debt fears simmer

Gold firms in Europe as debt fears simmer

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London: Gold firmed in Europe on Wednesday, building on three straight sessions of gains, as the dollar retreated and as warnings from credit rating agencies on some euro zone economies boosted haven demand for the metal.

Prices took further support from the International Monetary Fund’s announcement of the completion of the massive gold reserve sale it began a year ago, which analysts say removes a significant overhang to the market.

Spot gold was bid at $1,388.10 an ounce at 1224 GMT, against $1,385.30 late in New York on Tuesday. US gold futures for February delivery rose 30 cents to $1,389.10.

“Lingering concerns of debt surprises from the euro zone would continue to provide enough impetus to the markets in the near term," said Richcomm Global Services analyst Pradeep Unni.

“A major seller is mowed out of the way with the IMF declaring that it had completed its sales, and this should add to the bullish momentum," he said. “Currency debacles and QE2 should be enough to propel gold to further uncharted territory in 2011."

The dollar retreated as the euro won a reprieve after hitting new lows on the Swiss franc and Australian dollar, lifted by a news report that China was prepared to buy significant amounts of Portuguese sovereign debt.

Confidence in the single currency remains fragile, however, after a steady drip of grim ratings news. Moody’s warned late last week that it might cut Portugal’s credit rating, and Fitch later said the same thing about Greece.

On the wider markets, European shares reversed early slim gains to turn negative after an uninspiring session in Asia, while oil prices rose towards two-year highs, supported by a drop in US oil and gasoline inventories.

Bonds issued by highly indebted euro zone countries remained under pressure as Greece was threatened with another rating cut, while German Bunds were steady as the market wound down for the Christmas break. The financial markets are now awaiting third-quarter growth data from the US.

“The release of US Q3 GDP figures later (to)day could well be dollar supportive, if as expected they are revised upwards to 2.8% from the previous 2.5%," said CMC Markets analyst Michael Hewson.

The IMF, meanwhile announced it had completed its planned sale at least 400 tonnes of bullion. Buyers included India, Mauritius, Sri Lanka and Bangladesh, while much of the gold was sold on-market. “Without IMF selling going forward, we expect official sector buying will accelerate in 2011," UBS said in a note.

Elsewhere holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, eased to 1,298.029 tonnes by 21 December from 1,298.940 tonnes the previous day, data from the fund showed.

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Published: 22 Dec 2010, 10:09 PM IST
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