--Comex February gold recently rose $19 to $1,658.60 a troy ounce
--Gold tracks euro higher after the successful Italian and Spanish debt auctions
--The market's upward momentum is building toward $1,700, analyst says
By Matt Day
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Gold futures rose for a third consecutive day on Thursday, nearing a one-month high as the euro's sharp rise after a pair of successful euro-zone debt auctions and low interest rates in the currency union drew buyers to precious metals.
The most actively traded gold contract, for February delivery, recently rose $19, or 1.2%, to $1,658.60 a troy ounce on the Comex division of the New York Mercantile Exchange. The contract climbed as high as $1,660.90 a troy ounce, the highest intraday price since Dec. 13.
Debt auctions in Italy and Spain on Thursday were considered to be successful, easing worries about the financial stability of two of the currency union's more debt-laden members. The euro rose against the dollar in response, lifting demand for precious metals as alternative assets.
A falling dollar can increase interest in dollar-denominated gold futures by making them appear cheaper for buyers using other currencies. Some investors buy gold to shield their wealth against weakness in the currency.
Gold was also fueled by the view that low interest rates in Europe and the U.S. are here to stay. The European Central Bank Thursday said it would leave its benchmark rate unchanged, but in a press conference, ECB chief Mario Draghi kept the door open to future cuts. Uncertainty, he said, remains high and "we stand ready to act."
Low interest rates can boost the appeal of holding gold compared with yield-bearing assets. Easy money policies also tend to stoke interest in gold as a hedge against the potential inflation such policies can bring down the line.
"Precious metals, especially gold and silver, could benefit from a surprise cut as this would make it clear that the central bank is committed to maintaining liquidity," Standard Bank analyst Marc Ground said in a note.
Gold's gains this week also came on signs that the market's slide in late-2011 has led to an increase in physical buying of the metal.
Gold "remains underpinned by solid physical buying interest and is well placed to extend higher in the coming sessions," said James Moore, an analyst with metals research service FastMarkets.
Analysts said the selling pressure that pushed futures down 10% in December has mostly faded, with money managers returning to gold as a hedge against potential economic turmoil in 2012.
A decisive move above $1,642 a troy ounce could draw more buying from investors who place bets based on patterns in trading activity, analysts with Barclays Capital said in a note, potentially setting the market up for a run toward $1,700 an ounce.
