Gold ticked higher on Thursday as the euro steadied against the U.S. dollar ahead of a European Union summit that may decide to help debt-laden Greece avoid default and eventually restore confidence in the single currency.
Gold has dropped 12 percent since striking a record at $1,226.10 in December as the dollar gained on mounting fiscal worries in the eurozone, and recently on U.S. Federal Reserve Chairman Ben Bernanke’s comments about a stimulus pullback.
Spot gold was quoted at $1,078.35 an ounce by 0308 GMT, up $6.80 from New York’s notional close on Wednesday, still within sight of a three-month low of $1,043.75 hit last week.
“Obviously the anticipation is that we’re going to get some good news as far as support for Greece is concerned,” said Darren Heathcote, head of trading at Investec Australia in Sydney.
“If the dollar does unwind tonight, if we get a good result from the European Council, then you can expect that gold is going to go higher. We’ll certainly be targeting $1,100 again. Once the dust settles, gold will be higher,” said Heathcote, referring to a high seen last week.
Other precious metals held New York levels, with platinum holding near a 5-week low. U.S. gold futures for April delivery added $2.7 an ounce to $1,079 an ounce.
European Union leaders will hold a summit on the economy Thursday and there was growing speculation a package would be hammered out for Greece.
The euro held steady at $1.3732, having fallen 0.4 percent on Wednesday. It has dropped more than 4 percent this year on mounting worries over how some eurozone countries like Greece, Portugal and Spain will service their debt.
In his most comprehensive description to date of how the Fed aims to withdraw its stimulus, Bernanke said the U.S. central bank could soon raise the discount rate it charges banks for emergency loans, but stressed that would not be akin to a tightening in monetary policy.
In theory, a firmer dollar reduces gold’s appeal as an alternative investment.
Trading was thin in Asia due to the absence of Japanese players and ahead of the Lunar New Year, although a steadier euro spurred bargain-hunting in Hong Kong.
The world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings stood at 1,106.378 tons as of February 10, unchanged from the previous business day.
Oil climbed toward $75 a barrel on Thursday, extending the previous session’s gains, lifted by an upbeat oil demand growth estimate by the U.S. Energy Information Administration.
Source: Reuters