World gold firms near highs, euro debt worries persist

World gold firms near highs, euro debt worries persist

Singapore: Gold firmed on Thursday, within sight of its highest in nearly three weeks hit the previous session, as worries about euro zone’s fiscal crisis lingered despite hopes the European Central Bank and the United States would step in to help.

The European central bank is under pressure to unveil new steps to stabilise the euro zone when it meets on Thursday as the currency bloc battles a crippling debt crisis that has stoked contagion fears in the United States and Asia.

Spot gold added $3.90 to $1,391.25 an ounce by 10:56am, after rising as high as $1,396.70 on Wednesday -- its strongest since 12 November. Bullion was still below a lifetime high around $1,424 struck in early November.

Bullion got a bit of a boost from news that China’s gold imports jumped six-fold in January to October to more than 200 tonnes, although dealers said Thursday’s gains were mostly driven by investment demand.

“I don’t think you can solve this problem in a short period of time. I think we are still worried about the situation in Europe," said Dick Poon, manager at Heraeus in Hong Kong.

“Recently, we only see physical demand on the investment side. Other than that, manufacturers are quite slow. This is related to the high price. They take sometime off," said Poon, referring to jewellery makers.

US gold futures for February rose $5.0 an ounce to at $1,393.3 an ounce.

The world’s largest gold-backed exchange-traded fund, SPDR Gold Trust , said its holdings rose to 1,293.891 tonnes by 1 Deember from 1,286.603 tonnes on 29 November. The holdings hit a record at 1,320.436 tonnes on 29 June.

A bullish target at $1,403 per ounce for spot gold is unchanged, as the current rise may extend its gain to the 100 percent Fibonacci projection level, according to Wang Tao, who is a Reuters market analyst for commodities and energy technicals.

US investment bank Goldman Sachs Group Inc said on Wednesday it expects gold prices to peak near $1,750 an ounce in 2012 on rising US interest rates, even as the metal’s rally is expected to continue in 2011 due to quantitative easing.

“I think a recovery in Europe will be very slow. Even though Portugal said that it has no problem, people don’t believe that," said a dealer in Hong Kong. “The worry is psychological. The European Union has to step in and give them the money," he added.

Even after Ireland’s bailout, investors have been losing confidence that Portugal and Spain can escape a similar fate, leading to expectations the ECB will announce backstop measures to keep cash flowing in its financial system, though it may disappoint investors by not being ready to increase bond purchases just yet.

A US official told Reuters that Washington would be ready to support the extension of the European Financial Stability Facility via an extra commitment of money from the International Monetary Fund.

Silver tracked gold higher. Platinum rose to its highest since 12 November, while palladium was at 3-week high.

The world’s largest silver-backed exchange-traded fund, iShares Silver Trust , said its holdings rose to 10,782.69 tonnes by Dec. 1 from 10,711.23 tonnes by 26 November. The holdings jumped to an all-time high of 10,893.68 tonnes on 23 November.

The euro sat tight after surging higher the previous day, as investors waited to see if European Central Bank policy makers meeting later on Thursday would take any measures to alleviate worries over euro zone debt.