Gold hits one-month high ahead of EU summit

SINGAPORE: Spot gold rallied to the highest in a month on Wednesday, on growing doubts that a key European Union summit would be able to resolve the euro zone debt crisis.

Deep disagreement remained on critical aspects of the potential agreement among European policymakers on how to solve the debt crisis, dimming prospects for a comprehensive deal at the summit that starts later on Wednesday.

"In the last few days gold has shown that it is well supported, and uncertainty on the European debt situation has turned investors' interest to gold," said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong.

Spot gold rallied more than 1 percent to a one-month high of $1,719.8 an ounce, before easing to $1,714.90 by 0705 GMT, on course for a fourth straight session of gains.

US gold also rose more than 1 percent to $1,721.4, its highest since Sept. 23, and stood at $1,716.20.

Improved technicals also buoy prices.

"The technicals have improved significantly and very positive charts are developing, pointing to higher prices," said Nick Trevethan, senior commodities strategist of ANZ.

Holdings of the SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, rose 0.9 percent to a one-month high of 1,244.156 tonnes by Oct. 25.

Freeport McMoRan Copper & Gold Inc has declared force majeure on concentrate sales agreements from its strike-hit Grasberg mine in Indonesia.

The news lent support to the gold market, although investors are far more concerned about the euro zone debt crisis and the global economic outlook.

Grasberg had expected its gold sales to fall to 1.3 million ounces (about 40 tonnes) this year, from last year's 1.8 million ounces, a fraction of the world's total above-ground gold stocks of 165,500 tonnes by end of 2009, according to the World Gold Council.

Trading volumes were thin, as market participants await the result of the EU summit.

Adding to the uncertainty on the economic outlook, US consumer confidence dropped unexpectedly to its lowest level in two-and-a-half years in October.

Spot silver hit $33.69 an ounce, its highest level since Sept. 23, before paring some gains to $33.41.

Spot platinum rose to a 1-1/2-week high of $1,573 earlier, then eased to $1,563.49. Platinum has gained more than 3 percent so far this week, but remains at a deep discount of more than $150 to spot gold.

Investment interest in platinum group metals, widely used in making autocatalysts, remained low due to uncertainty on the global economic outlook.

Copyright Reuters, 2011