London 04/07/2011 - Gold prices recovered last week’s losses in European trading on Monday morning on bargain hunting and expectations the ECB will raise interest rates this week, which should lift the euro against the US dollar and in turn help the yellow metal. Business is likely to remain light in afternoon trade, with the absence of US market participants due to the Independence Day holiday there Spot gold rose $12 to $1,494.60/1,495.40 per ounce, having fallen $24.10 or 1.6 percent to a six-week low of $1,417.70 per ounce on Friday. On the charts, the metal found support at 100-day moving average of $1,480, while resistance is now pegged at $1,502.70 and then $1,515. “Gold is up this morning in the face of weakening dollar index as euro currency gains on a release of an 8.7 billion loan euro to Greece and expectations ECB [is] to raise interest rates during its meeting on July 7,” broker Fairfax said. The euro was little changed at 1.452 versus the US dollar, after nearing its best for a month earlier, while investors mulled over the IMF/EU disbursement of the July tranche of their emergency loans to Greece over the weekend. While eurozone ministers warned that austerity measures may have unpleasant consequences, ratings agency Standard & Poor's today said that a debt rollover plan for Greece could amount to a “selective default”. The next macroeconomic event this week is the European Central Bank rate decision on Thursday, at which the central bank is seen raising the benchmark rate, widening the differential with the US, where no increase is expected for the next few months. Gold prices fell 1.5 percent last week and, although they have recovered somewhat today, have yet to regain the key $1,500 mark. “Aside from the general weakness of commodity prices, the loss can also be attributed to an outflow from ETFs,” broker Commerzbank said. Holdings in the world's largest gold exchange-traded fund (ETF), SPDR Gold Trust, dropped 2.42 tonnes to 1,205 tonnes on Friday. Meanwhile, speculative financial investors also exited positions in the week to June 28 - net long positions fell 18 percent to 169,600 contracts to a low since February. “Since the price of gold has continued to fall after the last statistical cut-off date, even more positions have probably meanwhile been closed down,” Commerzbank noted. Among other precious metals, silver rose 21 cents to $34.01/34.06 per ounce. “We see further risk for silver longs to be unwound in the coming weeks, which may bring the important technical area at $32.70/33.00 into focus before too long,” broker Credit Suisse said. Elsewhere, platinum was steady at $1,720/1,725 per ounce, up $3, while palladium was $2 lower at $755/760. In news, US auto sales increased 7.1 percent to 1.053 million vehicles in June, according to data released late on Friday. This brought the seasonally adjusted annualised rate to 11.45 million, below the pace of 11.8 million in May. Platinum and palladium are mainly employed in autocatalysts to clean out exhaust emissions.

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