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Gold hits 1-month high on euro, may test new highs
Sun Feb 21, 2010 9:40pm EST

By Lewa Pardomuan

SINGAPORE, Feb 22 (Reuters) - Gold jumped to its highest in
a month on Monday as the U.S. dollar took a breather from a
recent rally and fund buying picked up after the euro gained on talk about a speedy bailout for debt-ridden Greece.

Investors have poured money into gold as a hedge against
currencies' volatility due to fears about debt defaults in the euro zone, while the metal's steady rebound since falling below $1,100 also ignited technical buying. Dealers expected gold to eventually test January highs around $1,150.

Spot gold XAU= hit an intraday high of $1,130.65 an ounce
and was quoted at $1,126.55 by 0215 GMT, up $9.05 from New
York's notional close on Friday.

"It looks like there's quite a solid support at $1,100 for
the time being. We are waiting for Bernanke's speech this week and some data, and will then see what happens," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.

"The dollar continues to weaken and we don't see much
selling around," said Leung, referring to selling from the
physical sector which normally happens when gold hits new
highs.

Bullion was about 8 percent below a lifetime high above
$1,200 an ounce struck in early December and was moving away
from a three-month low around $1,043 hit almost three weeks
ago.

The dollar fell as investors reassessed chances of a
earlier-than-expected interest rate hike by the Federal
Reserve, while a newspaper report about a plan by countries
using euro to help Greece lifted the single currency. [EUR/]

Markets await Fed chief Ben Bernanke's testimony in
Congress on Wednesday and Thursday when investors will be
looking for clues on rates after the Fed surprised many by
raising the discount rate last week.[ID:nN19125008]

Gold initially dropped 1 percent on Friday after the
announcement of the hike in discount rate before regaining
strength as worries about volatility in currencies lingered.
Billionaire investor George Soros said a makeshift assistance
should be enough to rescue Greece but bigger problems facing
Europe would leave the future of the euro currency in question.
[ID:nSGE61L00M]

Greece's deficit swelled to 12.7 percent of gross domestic
product in 2009, way above the EU's cap of 3 percent. Greece
has pledged to reduce its budget deficit to 8.7 percent in
2010.

U.S. gold futures for April delivery GCJ0 added $9.0 an
ounce to $1,131.1 an ounce on Friday. It hit an intraday high of $1,131.50 on Monday, its strongest in a month.

Gold priced in euros XAUEUR=R held near last week's
record around 830 euros.

"I think we've seen a bit of fund buying today, which is
also driven by the fact that gold has managed to stay above
$1,100 an ounce," said another dealer in Hong Kong.

The world's largest gold-backed exchange-traded fund, SPDR
Gold Trust (GLD), said its holdings stood at 1,107.596 tonnes as of Feb. 19, down 1.828 tonnes or 0.2 percent from the previous business day. [GOL/SPDR]

Noncommercial net long U.S. gold futures positions rose to
188,858 contracts in the week ended Feb. 16 from 181,519
contracts a week earlier, according to the weekly Commitments of Traders report published by the Commodity Futures Trading Commission. It was the first increase in a month.

http://www.reuters.com/article/idUSSGE61L01W20100222?type=goldMktRpt