Gold climbs to one-week high in London

Gold rose above $1,700 on Monday to its highest level in a week, helped by a strong euro and gains in equity markets, on hopes Europe will unveil fresh measures to tackle the region's growing debt crisis. Spot gold rose 2.1 percent to $1,715.10 an ounce at 1503 GMT, from $1,679.15 late in New York on Friday, having earlier risen to a one-week high at $1,719.89 an ounce.
Reflecting an improvement in investor sentiment, European shares gained, while the euro rose against the dollar. A weak dollar makes commodities priced in the US unit cheaper for holders of other currencies. Sentiment was boosted by German and French efforts to outline plans for a fiscal union before a European Union summit on December 9, stepping up a drive for coercive powers to reject national budgets in the eurozone that breach EU rules.
Although gold is regarded as a safe haven asset to shield investors in times of uncertainty, it has increasingly become prone to pressure from selling in the wider financial market, moving in tandem with other assets as investor sentiment remains fragile."In the short-term gold is not acting any differently from commodities or equities. And where we go from here depends on what solutions we get (for the eurozone crisis)," Matthew Turner, analyst at Mitsubishi said.
Investors are also likely to closely watch a meeting by eurozone ministers on Tuesday, as detailed operational rules for the region's bailout fund await approval. Approval would pave the way for the 440 billion euro facility to draw cash from investors. "What appears to be going on is that there are clear moves within Europe and a recognition that some sort of closer fiscal integration is necessary. Quite how you get to it from where we are now, I think remains very difficult," Nic Brown, analyst at Natixis, said.
US gold rose 1.8 percent to $1,716.10 an ounce. With the US closed for Thanksgiving last Thursday, there has been no movement in ETF flows as of Friday. Last week, global holdings of gold rose by 300,500 ounces to a record 69.978 million ounces, led by inflows into SPDR, ETFS' ex-US funds and COMEX Gold Trust.
Analysts warned that gains in the precious metal could be shortlived, with concerns about the implications of the region's growing debt crisis likely to keep investors cautious. Moody's warned on Monday the rapid escalation of the eurozone sovereign and banking crisis was threatening the credit standing of all European government bonds, while the OECD said the region's crisis has become the biggest threat to the global economy.
"We see limited upside potential for gold in the short term," Commerzbank analysts said in a note. "As Belgium's rating downgrade... shows, the sovereign debt crisis in the eurozone is spreading to more and more countries so a renewed increase in risk aversion and thus forced selling on the futures market is possible at any time."
Belgium sold 2 billion euros of government bonds on Monday, paying a higher price to borrow after secondary market yields rose sharply last week and after Standard & Poor's cut the country's credit rating. Gold, which hit a record $1,920.30 in September, is up more than 20 percent in the year-to-date, and is trading nearly flat so far in November. Spot silver tracked gold to rise 3.3 percent to $32.04 an ounce. Spot platinum rose 1.7 percent to $1,551.25 an ounce, while spot palladium rose 4.8 percent to $588.97 an ounce.