Gold advances on European banks concerns
Precious-Gold bounced for the second day on concerns that European banks will have to refinance loans provided by the ECB at higher borrowing cost which enhanced demand on gold as a safe harbor amid financial crisis.
Spot gold is traded at $1243.28 an ounce, recording a high of $1243.72 and a low of $1239.45, where it may find resistance at $12450 levels.
Gold is continuing its upside trend that started since November and setting for its largest incline since the last quarter of 2007 due to debt woes in Europe.
European banks will have to pay 442 billion euros on July 1 under the ECB's 3-month refinancing operations. Also, two weeks from now EU 27 leaders will apply stress tests on European banks to assess their reaction if they faced a financial shock. Last week BNP Paribas was downgraded by Fitch while S&P said Spanish banks will encounter some difficulties in the coming two years.
Outside the euro zone, U.S. consumer confidence dropped in June below estimates which raised concerns with regard recovery in the world's largest economy. PMI for China slumped to 53.2 from 53.9 in May ahead of the release of Chicago Purchasing Manager in the U.S. later on today.
Investors are assessing fundamentals from global economies for the moment to determine the strength of global recovery amidst the planned spending-cut plans which may affect growth prospects.
Yesterday, gold added $2.20 or 0.18% to close at $1240.37 an ounce. Gold Price was setin London on Tuesday at $1234.50 per ounce during the PM fixing retreating from $1236.00 during the AM fixing.
In currency market, the dollar halted its gains against the euro after the drop in U.S. consumer confidence, where the euro-dollar pair is currently trading at 1.2231 from the day's opening at 1.2186.
Crude oil, on the other hand, surged to $76.25 a barrel ahead of the release of the EIA report at 14:30 GMT. Gold is getting support from oil as a hedge against inflation, especially as commodities advance taking advantage of the dollar's decline.