Gold extends the gains, supported by high level of uncertainty

Gold continues the weekly bullish wave as we expected earlier, where the metal is supported by the high level of uncertainty ahead of the European summit's results today, where all eyes are looking forward to the European leaders, with speculations that they will be able to provide a comprehensive plan to tackle the debt crisis and stop the contagion.

Gold opened in the Asian session at $1705.02 per ounce and recorded the highest at $1719.96 and the lowest at $1694.82 and is currently hovering around $1717.50 an ounce.

Markets are anxious, while jitters and rising debt woes are dominating investors, especially after news reports yesterday showed that the finance chiefs' meeting ahead of the European summit today was canceled, which supported metals to rebound yesterday despite the strong dollar, where we clarified earlier that the U.S. dollar pressured metals to the downside as gold became less attractive after exchange institutions raised margins on gold futures twice.

The cancelation of the finance ministers' meeting provided us with two points of view, where the first one is positive and suggests that finance ministers found common grounds and saw no need for the meeting today. But, on the other hand, the second view is negative and indicates that European leaders found no applicable solutions and will provide nothing to the markets today.

Gold is currently trading around the highest level in more than a month, after the sharp incline seen yesterday, where the importance of the summit and the effects it could have on the market supported investors to hold more gold as a hedge against uncertainty especially with lack of major fundamentals and the sharp volatility and fluctuations seen in the market.

The European summit highlights the day with all eyes worldwide focused on the European leaders, where a final plan is expected to overcome the debt crisis, awaiting details on the mechanism of aiding Greece, leveraging the European Financial Stability Facility and empowering the banking sector.

Concerning Greece, markets are waiting for more information regarding the second bailout and the percentage hair-cut on the Greek bonds, which could be around 50%. Leaders will also provide a final decision on how the European Financial Stability Facility will work.

In general, we expect metals to extend the gains today ahead of the summit results, where a strong plan could relieve markets and ease the jitters and debt woes, while a disappointment could trigger more volatility and fluctuation and could spread losses across the board, which could force investors to close their position on gold to cover the losses.

Silver also extended the gains recorded in the past two sessions after opening the session today at $33.23 per ounce, recording a high of $33.70 and a low of $32.87, and is trading now around $33.31 per ounce.

Among other precious metals, platinum opened the session today at $1565.00 per ounce and is currently trading around $1566.25 per ounce, after reaching the highest at $1577.25 and the lowest at $1561.75 per ounce.