Gold firms as Greek debt fear returns
Singapore, November 2, 2011
Gold prices firmed on Wednesday, riding on renewed safe-haven demand as fears about Greece's debt crisis returned after its government shocked the markets with a call for a referendum on a European Union aid deal.
Greek Prime Minister George Papandreou fought off a barrage of criticism to win the backing of his cabinet to push ahead with a referendum the government said would take place as soon as possible on a European Union debt bailout deal.
US gold rose as much as 1 percent to $1,729.4 an ounce, and eased slightly to $1,725.20 by 0640 GMT. Spot gold inched up 0.3 percent to $1,723.39.
Meanwhile, the euro wallowed near its three-week low against the dollar, and Asian shares wiped out gains made during the huge relief rally last week that followed an agreement among European leaders to help reduce Greece's huge debts.
"People who hadn't realised before should realise now that Europe's issues will continue to be troublesome and difficult," said Jeremy Friesen, commodities strategist at Societe Generale in Hong Kong.
"There will continue to be risks, which will put more and more pressure on central banks, especially the ECB (European Central Bank), to be more accommodative, which will be bullish for precious metals."
Eyes are on a news conference by the US Federal Reserve chief Ben Bernanke later in the day after a two-day policy meeting. The Fed looks set to take a breather from monetary stimulus measures on Wednesday, even if financial market turbulence heightens the chances of action later.
Investors will also closely watch the rate decision by the European Central Bank due Thursday, just as a Group of 20 summit is to take place and likely to pressure Europe on the debt crisis solution.
Physical market activities have been muted in the past few days, with gold bar premiums holding steady in Hong Kong and Singapore in the range of $1 to $1.50 an ounce above spot prices, dealers said. "There was some selling from Thailand, but overall the market is quiet and volume low," said a Singapore-based dealer, adding that demand could return if prices drop below $1,700.
The most-active US silver futures contract rose about 3 percent to $33.76 an ounce, before giving up some gains to trade at $33.48. - Reuters