Gold rises on EU pledge

Singapore Gold rose more than 1 per cent on Friday, tracking a surge in the euro after European leaders agreed on the recapitalisation of banks without boosting government debt, helping ease fears over the region's debt crisis. But heavy losses over the past three months mean gold is still on track to post its worst quarter since 2004, as a growing global economic slowdown from Europe to China pushed investors to safer havens such as the dollar. Spot gold was up 1 per cent at $1,566.84 an ounce by 0415 GMT, after hitting a session high of $1,569.20. US gold gained 1.1 per cent to $1,567.60. Gold jumped as the dollar wilted against the euro after European leaders agreed to create a single supervisory body for euro zone banks and to allow them to be recapitalised directly by the currency area's rescue fund without adding to government debt. That provided a big relief to investors in markets from commodities to equities, who had low expectations the ongoing summit of European leaders would yield concrete solutions to solve the euro zone debt crisis how running into its third year. "It still falls short of a concrete solution, but the removal of severe pessimism over what's going to come out of the EU summit is driving markets higher," said Vishnu Varathan, market economist at Mizuho Corporate Bank. "It also shows that, at least, an immediate crisis in the region triggered by the banking sector could be averted." Friday's rise has helped gold erase losses for June, and it is on course to post its first gain in five months. But for the second quarter, bullion is still down more than 6 per cent, its steepest loss since 2004. Gold has fallen more than 12 per cent from the 2012 peak of around $1,790, and 18 per cent from an all-time high above $1,920 reached in September 2011. There is strong support for gold at $1,523, and if that holds, the precious metal may have the momentum to match last year's high, said Lynette Tan, an analyst at Phillip Futures. "In the long run we're still bullish on gold. It's still likely to hit last year's high of $1,920. The global economy is not doing well and we expect safe-haven demand to be back for gold," said Tan. What would support gold's strength in the second half of 2012 would be possible further weakness in the dollar, with the US central bank likely to support a patchy recovery in the world's top economy with more stimulus measures, analysts say.