ET:Gold rises as the euro rebounds, but gains fragile
LONDON: Gold prices rose in Europe on Tuesday as the euro strengthened versus the dollar, but gains were capped by concerns that policymakers' efforts to address the euro zone debt crisis are falling short and could keep European assets under pressure.
Spot gold was up 0.8 per cent at $1,606.00 an ounce at 1012 GMT. While spot prices are still up more than 12 per cent this year, analysts say they will likely struggle for traction from here if the dollar starts strengthening again.
The dollar's gains versus the euro on the back of the crisis have weighed on gold in recent months, putting the metal on track for its first quarterly loss in more than three years.
"All the bull-run dynamics are still in place, but you have this trend of the strengthening dollar, positive data out of the United States as opposed to weak data out of Europe," said VM Group analyst Carl Firman.
"A strengthening greenback has traditionally seen gold in dollar terms decline, and that is what we're seeing. For a safe haven, you're looking at the dollar really. There's a lot of volatility in gold, in commodities, in other asset classes."
The euro rose 0.4 per cent versus the dollar after yields at a Spanish treasury bill auction came in lower than expected, triggering stop-losses on some short positions in the single currency. Sentiment towards the unit remained fragile however, as concerns over the debt crisis lingered.
Euro zone ministers agreed on Monday to boost IMF resources by 150 billion euros to ward off the debt crisis and won support for more money from EU allies, but it was unclear if the bloc would reach its 200 billion euro target after Britain bowed out.
"The broader market continues to be dissatisfied with policymakers' reluctance for the ECB to become the lender of last resort or boost the euro area stability fund," said Andrey Kryuchenkov, an analyst at VTB Capital.
European shares, meanwhile, rose after better-than-expected German business sentiment data, while safe-haven German bunds fell.
GOLD SET TO STRUGGLE
Gold prices are set to struggle to make up significant ground for the rest of the month, with traders wary of adding to long positions before year-end, analysts said.
Gains are unlikely unless they can move back above their 200-day moving average, a key technical level breached last week, just above $1,620 an ounce.
