LONDON—The price of gold climbed and that of silver surged, taking their cue from tentative hopes for a European debt resolution that buoyed stocks.
Ahead of the New York day, spot gold was up $42,10, or 2.6%, at $1,670.10 a troy ounce, a sharp turnaround from the 2˝-month low of $1,533.23 an ounce hit Monday.
European stock markets pushed strongly higher Tuesday as investors bet that further progress will be made Tuesday toward agreeing a means of tackling the European debt crisis. Investors have been speculating that a huge expansion of the European Financial Stability Facility may be on the cards.
While gold isn't traditionally a beneficiary of positive news, it has been undermined in recent weeks as cash-strapped investors liquidated their holdings and others opted to sit on the sidelines amid unusually volatile market conditions. With the wider market mood appearing to calm, gold pushed higher Tuesday.
"The selling that swamped the gold market yesterday, sending gold prices plunging…has abated and may be over," said independent markets commentator Dennis Gartman.
He added that while it is perhaps "premature" to say whether definitive lows in gold have already been reached, "certainly the atmosphere in the collective capital markets is less onerous, less leprous, less vile than it was yesterday at this time."
Spot silver was also firmly higher, a sharp turnaround from its 16% slide to a 10-month low at $26.10 an ounce on Monday. It jumped $2.42, or 7.9%, to $33.17 an ounce.
But while gold's gains are encouraging, the metal's reputation as a so-called "safe" investment is still damaged and the metal must demonstrate a measure of stability in coming sessions if investors are to return to bullion in force, said UBS analyst Edel Tully.
"Recent price action is clearly not reflective of a healthy market. Gold needs to stabilize for now, after suffering a good deal of reputational damage with recent wild moves," she said.
However, while investors should reevaluate their reasons for holding gold, "nothing has materially changed in the gold space," and the bank retains its bullish stance on the yellow metal, she added.
The Shanghai Gold Exchange again raised margin requirements for gold and silver. The minimum margin for gold contracts will be 20% of the contract value from 15%, starting from settlement on Thursday, and its minimum margin for silver forward contracts to 22% from 18%.
The move is the second increase the bourse has announced in the last two trading sessions and follows a similar hike by U.S. exchange operator CME Group Inc., which came into effect at the close of trading Monday. CME Group raised its gold margins by 21% and silver margins by 16%.
Among other precious metals, spot platinum was up $21, or 1.3%, to $1,578 an ounce, and spot palladium surged $25, or 4%, to $653 an ounce.
