Gold gains two percent in Europe

Gold rose by 2 percent on Thursday, almost erasing the steep losses of the previous day, after the European Central Bank fanned investor concern over growth by saying the eurozone economy had worsened enough to warrant a shift in monetary policy.
The bank left interest rates unchanged at 1.50 percent, as expected, yet ECB President Jean-Claude's downbeat assessment of the current situation dented the euro, pushing up the price of gold in the single currency, as well as in dollars.
Spot gold was last up 2.1 percent on the day at $1,855.29 an ounce by 1400 GMT, while gold in euros was last up 2.8 percent at 1,324.00 euros an ounce, some 2.5 percent shy of Tuesday's record 1,366.38 euros. The weakness in the euro and resulting dollar strength can act as a headwind to gold, yet the prospect of a period of steady eurozone rates and slowing growth would likely continue to pique investor appetite for the metal. "The situation, econommally and politally, will not improve at all in the near future," said MKS Finance head of trading Afshin Nabavi.
Gold's 23 percent rise in the current quarter - its largest quarterly gain since 1980 - has largely been the product of investor nervousness over the impact to the US and eurozone economies from their huge debt piles. Gold has had a choppy week, hitting a record high above $1,920 on Tuesday before correcting more than $120 an ounce to the week's lows in the next session.
Physical gold purchases rose after prices eased below $1,800 on Wednesday, dealers said. Physical demand is expected to rise ahead of India's wedding season and as concern over the economic outlook brightens gold's appeal as a haven. "In the medium term to long term, it's pretty clear that the bullish trend hasn't been tarnished a bit," said Pradeep Unni, senior analyst at Richcomm Global Services. "We take yesterday's slide as correction which is good for the overall bullish market."Swiss bank UBS said it sees the eurozone debt crisis as a key factor driving prices higher, as it raised its 2012 gold price forecast to $2,075 an ounce from $1,380 and its 2011 price view to $1,665 an ounce from $1,500.
"Our core view is that ongoing global macroeconomic disappointments, the inevitability of further negative turns in the European sovereign debt crisis, with low business, consumer and investor confidence will lead to gold being increasingly used as the line of defence against additional negative market outcomes," the bank said in a report. "With the pool of competing asset alternatives sparse, 'new' money will likely flow into the gold market over the months ahead and into 2012, and this should have significant price implications."
"Much rests on policymakers' actions, in particular whether they will act proactively and whether such action will in fact have a positive impact on growth," it said. On the supply side of the market, Libya's central bank, now under the control of the new regime, said on Thursday it had sold 29 tonnes of gold in April or May to merchants within the country.
Silver was up 1.95 percent at $42.33 an ounce. Holdings of the world's biggest silver-backed exchange-traded fund, the iShares Silver Trust SLV, rose by 72.7 tonnes on Wednesday, its biggest one-day increase since August 23. Platinum was up 1.5 percent at $1,842.49 an ounce, while palladium was up 1.5 percent at $758.47 an ounce.