Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Gold surged in Europe Wednesday morning (ARND WIEGMANN/Arnd Weigmann/Reuters)
Gold surged in Europe Wednesday morning (ARND WIEGMANN/Arnd Weigmann/Reuters)

Gold nears four-month high Add to ...

Gold was near four-month highs of $1,168.70 (U.S.) an ounce in Europe on Monday as the euro surged versus the U.S. dollar after euro zone finance ministers agreed a €30-billion aid package for debt-laden Greece.

Platinum and palladium prices also rallied, touching 20-month and two-year highs respectively, lifted by strength in gold and expectations demand for the precious metals used in catalytic converters will rise this year.

Spot gold was bid at $1,163.95 an ounce at 0920 GMT, against $1,159.00 late in New York on Friday. U.S. gold futures for June delivery on the COMEX division of the New York Mercantile Exchange rose $3.10 to $1,165.00 an ounce.

"The announcement of a deal reached to aid Greece over the weekend will likely support risk appetite in the short term, which means that the dollar may come under pressure and the euro rebound," said BNP Paribas analyst Anne-Laure Tremblay.

"Though the short-term correlation between gold and the EUR/USD has lessened since January, it remains a significant factor in shaping the gold price."

The euro hit one-month highs versus the dollar after euro zone finance ministers agreed a rescue package for Greece, prompting a short squeeze in the currency.

Spot gold typically benefits from dollar weakness, which lifts gold's appeal as an alternative investment and makes dollar-priced assets cheaper for holders of other currencies.

The usual link between gold and the euro/dollar eased last week as fears over the outlook for Greece boosted safe-haven flows into gold while hurting the euro, but that relationship has re-emerged as one of a number of supportive factors for gold.

Euro zone finance ministers approved a €30-billion emergency aid mechanism for Greece on Sunday, which together with at least €10-billion expected from the International Monetary Fund in the first year could add up to the biggest multilateral financial rescue ever attempted.

Investment Strong

Investment interest in gold was strong, with holdings of the world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust , rising to a record 1,141.041 tonnes on Friday.

Data from the Commodity Futures Trading Commission's Commitment of Traders report on Friday also showed a rise in net long positions, or commitments to buy, in the week to Apr. 6.

"The latest COTR figures... show how widespread the return of investor and speculative interest to the gold market has been," said UBS analyst Edel Tully in a note.

"Net long positioning surged 4.5 million ounces, the most significant inflow since the 6.4 million ounce rise in the week to Sept. 8, which at that time was the catalyst for gold to push up through $1,000."

Among other commodities, oil prices also rose above $85 a barrel as the dollar fell and data showed Chinese crude imports jumped to their second-highest monthly level in March.

Industrial precious metals platinum and palladium rose, with platinum hitting its highest since Aug. 2008 at $1,735 an ounce before easing back to $1,725.50 an ounce against $1,712, and palladium peaking at a two-year high of $519.75.

It was later bid at $511.50 against $510.

"Both metals would benefit from a period of consolidation, with chart indicators for platinum overbought with the RSI currently at 77," said James Moore, an analyst at TheBullionDesk.com.

"Friday's CoT report showed net speculative longs in both metals increased in the week to April 6th."

Silver hit its highest since Jan. 20 at $18.58 and was later bid at $18.48 an ounce against $18.35.

In the know

Top videos »