Gold prices rose this afternoon as the euro rallied against the US dollar, which is seen as an alternative investment to the yellow metals. The surge in Europe’s single currency came after debt laden euro zone members Spain and Italy saw their borrowing costs slide during today’s auctions.
Spain managed to raise €10 billion, doubling its maximum target of €5 billion, while Italy sold €12 billion worth of bonds, seeing yields on its one year notes drop from nearly six percent to 2.7 percent.
The results of the bond sales were seen as a sign that confidence that Europe is on the right track in resolving its fiscal problems is on the rise, lifting demand for riskier stocks.
However, the safe haven US dollar was back in demand later in the afternoon after US jobs and retail sales data disappointed investors.
According to the Department of Labor, initial claims for unemployment benefits surged 24,000 to 399,000 last week, while a report from the Commerce Department showed a smaller than expected gain of 0.1 percent in retail sales in December.
As a result, gold pulled back to US$1,653/oz, trimming its daily gains to US$10.
Other precious metals were headed in the same direction with silver rising 51 cents to US$30.48/oz and platinum tacking on US$3 to reach US$1,495/oz.
