Wednesday, February 10, 2010 9:45:35 AM
Jan Harvey
LONDON
Wed Feb 10, 2010 7:32am EST
LONDON (Reuters) - Gold rose above $1,080 an ounce in Europe on Wednesday as the euro rebounded versus the dollar on prospects of an imminent rescue package for Greece, increasing the metal's appeal as an alternative asset.
Spot gold was bid at $1,080.45 an ounce at 1200 GMT (7 a.m. EST), against $1,076.95 late in New York on Tuesday. U.S. gold futures for April delivery on the COMEX division of the New York Mercantile Exchange rose $4.40 to $1,081.10 an ounce.
Richcomm Global Services senior analyst Pradeep Unni said gold's heavy losses had introduced a weaker note in gold's technical position last week which persisted.
But he added: "The market is gaining momentum on hopes that Germany will provide loan guarantees in an effort to calm fears of a massive government default which has been directly undermining the strength of the euro-zone and its currency."
The euro rose to session highs against the dollar on Wednesday after German government coalition sources said bilateral financial aid could be provided for Greece.
Sources also said an agreement on the details of how Greece would be helped and by which countries could be finalized on the sidelines of an EU summit on Thursday.
The dollar rose last week versus the euro as worries over the health of some euro zone economies, including Greece, Spain and Portugal, hurt the single currency.
Strength in the U.S. unit curbs gold's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.
The markets are also awaiting Federal Reserve Chairman Ben Bernanke's testimony before the House Financial Services Committee hearing on unwinding Federal Reserve liquidity programmes at 1500 GMT (10 a.m. EST).
"The release of... Bernanke's speech on the Fed's strategy to cease its policy of extremely low interest rates will receive particular interest," said Commerzbank in a note.
OIL SLIPS
Among other commodities, oil rose above $74 a barrel on Wednesday, bouncing from earlier losses, as the euro extended gains versus the dollar on hopes for a bailout for Greece.
Gold tends to track crude prices, as the metal can be bought as a hedge against oil-led inflation.
On the wider markets, world stocks rose and European shares extended gains as sentiment improved on signs the European Union may arrange a bailout for troubled Greece.
On the physical side, Indian gold demand tailed off as prices recovered, while holdings of the SPDR Gold Trust exchange-traded fund were unchanged.
Among other precious metals, silver was at $15.54 an ounce against $15.41, tracking gains in gold.
Holding's of the world's largest silver-backed ETF, New York's iShares Silver Trust, have risen nearly 46 tonnes this week, suggesting investment demand for the precious metal is strong.
Elsewhere platinum at $1,519.50 an ounce against $1,502, and palladium at $418 against $415.
"Key near-term support is seen from seven-month trendlines in palladium and platinum at $386 and $1,468, respectively," Barclays Capital said in a note.
"Breaks here would likely prove to be the catalyst for the next leg of precious metal weakness."
http://www.reuters.com/article/ousiv/idUSTRE5B10OV20100210
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