Gold rose almost 1 percent on Thursday, following the euro and US equities for a second day of gains, as economic optimism due to an expected conclusion of a Greece's bond deal boosted financial markets across the board. Bullion prices were lifted as Greece moved closer to wrapping up its bond swap with private investors on Thursday. However, the metal came off its highs after the European Central Bank delivered a surprise warning on inflation.
Investor sentiment in gold already received a boost after a Wednesday report said US Federal Reserve officials were considering a new type of bond-buying program. However, investors are expecting gold to rally further on expectations that the Fed and the ECB will continue easy monetary policies to stimulate growth. Year to date, gold is up 8.5 percent. One gold fund manager said increased money printing by central banks should prompt investors to buy gold as a hedge against shrinking portfolio value.
"At some point, the (Greece) resolution is going to be much harder...other than just pouring money into it," said Dan Denbow, manager of the USAA Precious Metals and Minerals Fund with assets under management of around $2.1 billion. "Gold may not look like it's going anywhere, but anything else is devaluating against it," Denbow said. Spot gold was up 0.7 percent at $1,696.71 an ounce by 1:05 p.m. EST (1805 GMT). Despite a two-day rally, gold is on track for its second consecutive weekly loss after a 2-percent tumble on Tuesday as jitters over Greece's debt sent the metal below its 200-day moving average.
US gold futures for April delivery were up $13.50 at $1,697.40 an ounce. The gold market will closely monitor a 3 p.m. deadline for participation in Greece's debt swap. Greece, the debt-struck euro zone member, indicated that it had already cleared a vital threshold needed to pass a deal that will hand bondholders steep cuts in the value of their investments.
Bullion investors also await Friday's February US non-farm payrolls report, which could be a driver to gold prices via its effects on the US dollar. Holdings of gold in the world's largest exchange-traded products held at a record 70.82 million ounces. ETPs have drawn in well over half a million ounces of gold in the last month, reflecting demand among investors for the metal. Silver rose by 1.1 percent on the day to $33.74 an ounce. In other metals, platinum rose 1.7 percent to $1,652.74 an ounce, while palladium rose 2.1 percent to $694.97 an ounce.
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