Gold rebounds on European debt concerns

The shiny metal rebounded from recording the sharpest weekly drop since May last week on worries Portugal will be the third euro area economy to ask for a bailout.

The Handelsblatt newspaper said today Germany may relax its opposition to expanding the 750 billion- euros lifeline before the coming summit next month.

Angela Merkel said at the end of last year that it does not agree to expand the euro rescue fund and debt-plagued economies should rely on themselves in solving their own fiscal problems.

Speculations are increasing that France and Germany will put pressure on Portugal to accept a bailout from the EU and IMF due to the inability of the Portuguese government to raise capital.

After bond selling from Germany, France and Portugal last week, Spain, Italy and Portugal will sell long-term bonds this week.

The mounting debt concerns that the debt problem in the euro zone would be exaggerated this year gave support to the yellow metal helping it to pare some of last week's losses, while the euro is currently trading near four-month low against the dollar.

The previous session, gold shed $1.30 or 0.09% to close at $1369.47, while gold price was setin London at $1367.00 per ounce inclining from $1358.00 during the AM fixing.

SPDR gold trust, the world's largest exchange-traded fund backed by bullion, edged down to 1,271.64 metric tons on January 7 from 1,272.68 on January 6.

Moreover, the lower-than-expected rise in non-farm payrolls released on Friday gave another push to gold.

The dollar index, which tracks the dollar movements versus a basket of six major currencies, slipped to a low of 80.98 from the day's opening at 81.28, while it is currently trading at 81.25.

Spot gold rose to a high of $1372.21 an ounce and a low of $1367.60 from the day's opening at $1369.55, while is hovering around $89.00 a barrel.

Among other precious metals, platinum dipped to $1736.00 from the day's opening at $1744.00, palladium decreased to $747.00 from $758.70 and silver inched down to $28.85 from $28.93, as of 08:55 GMT.