Gold rises to three-month high in London

Gold rose to a three-month high on Thursday and headed for its biggest one-week rally in a month as Europe's bailout deal with Greece lifted the euro, while platinum hit a five-month peak as a damaging strike in major producer South Africa ground on. A stronger euro, coupled with growing concern over the impact on inflation from oil trading above $120 a barrel helped spur a bid for gold ahead of an options expiry later in the day.
Spot gold was at $1,775.35 an ounce at 1500 GMT, against $1,775.79 late on Wednesday. It earlier rallied to a high of $1,784.46 an ounce, its strongest since November 15, but failed to maintain traction above $1,780 an ounce. "(We had) technical buying yesterday with a lack of follow-through today despite support from weaker dollar," said Saxo Bank vice president Ole Hansen.
The euro rose to a 10-week high against the dollar and its strongest level since November versus the yen on Thursday after better-than-expected German data eased concerns about the euro zone's economic outlook. German business sentiment rose for a fourth month running in February, raising hopes that Europe's largest economy is improving and will avoid recession despite the problems facing indebted euro zone countries.
Gains in crude oil prices also helped gold. Brent oil powered to a nine-month high above $124 per barrel on Thursday due to heightened tension between Iran and the West. "The fact that we have Iran in the background is certainly helping through higher oil prices, which are a negative for most other industrial commodities. But for gold, it's positive as it boosts inflation-hedging and boosts its safe-haven attributes," Nikos Kavalis, a strategist at RBS, said.
Most-active US gold futures are set for a 3.1 percent gain so far this week, which would be their largest weekly rally since late January. For February, the gold price has gained 2.2 percent in dollar terms but more than 7 percent in yen, reflecting the decline of the Japanese currency. A further near-term boost to gold could come from the expiry of March options in New York later.
Wednesday's rally brought some hefty strikes into the money, with most open interest at $1,750 and $1,800 calls, which guarantee the holder the right, but not the obligation, to buy the metal at this price up to expiry. On the Asian physical markets, buyers in India and China, the world's two largest consumers, were sidelined by the recent jump in price, which in turn triggered a flurry of scrap selling, according to local dealers.
Platinum rose towards $1,730 for the first time since September after news on Wednesday that an illegal strike at number two platinum miner Impala 's Rustenburg mine was likely to cut customer deliveries in April by about 50 percent. Spot platinum eased 0.1 percent on the day to $1,717.74 an ounce, having gained more than 10 percent in the last month on market expectations for disruptions to South African supply.
Demand for the metal, which comes mostly from the Chinese jewellery sector and the European auto industry, is under enough threat from slower global growth. Analysts said the pace of rally might not be sustained for much longer. Palladium was down 0.4 percent at $715.75 an ounce, having earlier tracked platinum up to its own five-month high at $722.75 an ounce. Silver was up 1.6 percent at $34.80.