SINGAPORE: Gold prices rose to their highest in more than a month on Thursday after European leaders agreed on a plan to contain the region’s debt crisis, lifting sentiment in the financial markets, while a weaker dollar helped.
Euro zone leaders reached agreement on a comprehensive package of measures to tackle the bloc’s debt crisis after an EU summit that ran into the early hours of Thursday, spurring the euro to a seven-week high against the dollar.
Gold rose in tandem with other commodities and equities, with cash prices hitting a one-month high of $1,728.11 an ounce, before easing to $1,722.49 by 0320 GMT, on course for its fifth straight session of gains.
US gold futures, which also hit a one-month high of $1,729.7, traded nearly flat at $1,724.60. "The market is back to normal," said Dick Poon, manager of precious metals at Heraeus in Hong Kong, "The equity market has stabilised on hopes in Europe, and money is flowing back to precious metals."
Technical analysis suggested spot gold could face a strong resistance at $1,725 and may retrace to $1,701 during the day, said Reuters market analyst Wang Tao.
GOLD INTEREST SEEN SUPPORTED
But market participants cautioned that Europe’s problems might take a long time to be solved, even after the agreement at the summit, which would help support safe haven interest in gold in the medium to long term.
"Yes we’ve seen an agreement, but there will be a time lag between now and execution of the plan," said a Shanghai-based trader, adding that the lingering uncertainty over global growth will continue to support gold.
Investment interest has returned to the gold market in the past few days, as fears over the euro zone debt crisis eased with progress in the political wrangling among European leaders.
The SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, recorded an inflow of 16.645 tonnes over the past three sessions, according to the fund’s website. (www.exchangetradedgold.com)
Physical demand for gold as well as silver remained robust in Asia, thanks to strong investment demand as well as seasonal buying during the festival and wedding season in India, the world’s largest gold consumer.
Spot platinum rose to a one-month high of $1,601.25 before easing to $1,595.49. Spot palladium climbed 1.1 percent to $648.72.
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The Reserve Bank today chose to continue with its tight monetary stance and raised interest rates by 25 basis points-- 13th time since March, 2010-- to tame inflation, even as it lowered the growth target to 7.6 per cent for the current fiscal. | |
In a major policy decision, Reserve Bank Governor Duvvuri Subbarao also deregulated savings bank deposit rates with immediate effect. The Reserve Bank of India (RBI) has kept other key rate and ratio-- bank rate and cash reserve ratio (CRR)-- unchanged at 6 per cent each. It also retained the statutory liquidity ratio (SLR) at 24 per cent . |
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