Gold climbs to one-week high on Europe hopes

Gold rose above $1,700 (Dh6,239) yesterday to its highest level in a week, helped by a strong euro and gains in equity markets, and hopes Europe will unveil fresh measures to tackle the region's growing debt crisis. Gold held on to gains even after the International Monetary Fund said it was not in discussions with Italian authorities on a financing plan, ending speculation it was preparing an aid package. Spot gold rose 2 per cent to $1,712.83 a troy ounce at 1145 GMT, from $1,679.15 late in New York on Friday, having earlier risen to a one-week high at $1,718.48 an ounce. Reflecting an improvement in investor sentiment, European shares gained, while the euro rose against the dollar. A weak dollar makes commodities priced in the US unit cheaper for holders of other currencies. Selling pressure Although gold is regarded as a safe haven asset to shield investors in times of uncertainty, it has increasingly become prone to pressure from selling in the wider financial market, moving in tandem with other assets as investor sentiment remains fragile. "What appears to be going on is that there are clear moves within Europe and a recognition that some sort of closer fiscal integration is necessary. Quite how you get to it from where we are now, I think remains very difficult," Nic Brown, analyst at Natixis, said. "We think broadly speaking it's demand from developing countries like India and China and in particular demand from developing countries' central banks that still hold very little gold as a proportion of their overall foreign exchange reserves," Brown added. Investors are likely to closely watch a meeting by Eurozone ministers today, with detailed operational rules for the region's bailout fund, the European Financial Stability Facility, ready for approval. The approval would pave the way for the €440 billion (Dh2.1 trillion) facility to draw cash from investors.