Gold prices climbed in Europe on Monday as news that Greece's parliament had approved an austerity bill needed to release a second round of bailout funds lifted the euro, while platinum rose back towards a three-month high as supply issues flared up.
Spot gold was up 0.5 percent at $1,728.59 an ounce at 15:00 SA time, while US gold futures for February delivery were up $5.70 an ounce at $1,731.00.
Greek political leaders struggled last week to reach a deal on painful austerity reforms demanded by the European Union and International Monetary Fund in exchange for a 130 billion euro bailout. The measures have sparked violent protests in Athens.
Relief that they had approved the austerity package lifted the euro 0.7 percent against the dollar on Monday, though investors were sceptical about the strength of the euro's gains with more hurdles left to be cleared.
Gold prices have rallied more than 10 percent this year, supported by loose monetary policy in the United States, euro zone and elsewhere, which cuts the opportunity cost of holding gold and boosts its appeal as a store of value.
“A lot of cash, from the ECB, Bank of England et cetera, is still flushing around the system looking for a home,” said Saxo Bank Vice president Ole Hansen. “That will most likely keep metals supported, but expect some more consolidation this week.”
While gold is currently trading in line with nominally higher-risk assets like stocks and against the dollar, it is also receiving some support from uncertainty over the euro zone situation, albeit as a secondary driver.
“The defensive nature of gold should continue to support investment demand as investors look for safe havens,” said Morgan Stanley in a note on Monday. “A continued low or negative real interest rate environment will also provide support.”
MONEY MANAGERS RAISE NET LONGS
Money managers in gold and silver futures and options raised their net long position in the week of February 7, data from the US Commodity Futures Trading Commission showed on Friday.
“The price is currently also finding support from money managers who in the week to February 7 expanded their net long positions in gold 8 percent to a 5-month high of 155.6 thousand contracts,” Commerzbank said in a note.
“This has once again given rise to a certain potential for correction should the optimism of financial investors abate.”
On the physical markets, gold traders in major consumer India said demand was soft as buyers anticipated more price falls. India and China between them account for more than 50 percent of annual gold fabrication demand.
Silver was up 0.7 percent at $33.81 an ounce. Spot platinum was up 1.1 percent at $1,658.49 an ounce, while spot palladium was up 0.3 percent at $701.97 an ounce.
Platinum rose as high as $1,665 in earlier trade, just a few dollars short of a three-month high it reached last week.
It has been supported by concerns about supply from major producer South Africa, source of three-quarters of the world's platinum.
Anglo American Platinum, the world's largest producer of the precious metal, said on Monday that output would likely be flat in 2012 after it fell short of its target last year due to a spike in safety stops.
Number two producer Impala Platinum said it was unlikely to restart its Rustenberg operations, where it has been losing 3,000 ounces a day in output for almost a month, before next week.
Platinum's consequent outperformance has cut its discount to gold to around $70 an ounce from around $230 in January.
“Our medium-term outlook sees this trend continue, leading to the gold-platinum premium turning to discount in Q4 2012, averaging $50 an ounce over that quarter,” RBS said in a note. - Reuters