Gold prices climbed more than 2 percent Monday as Greece's draft budget confirmed the widely held view that default -- and its broader economic consequences -- is inevitable and despite the U.S. dollar soaring to levels not seen since early this year.
On Sunday night, Greek officials approved a draft 2012 budget that missed the deficit reduction target, all but assuring a default. European financial leaders, meanwhile, met Monday on how to protect their banks from the Greek default.The European Central Bank was buying Italian and Spanish bonds to help protect those economies from sliding into the same plight as Greece.
The big issue in the Eurozone remains avoiding contagion from the all-but-inevitable Greek sovereign default, Larry Hatheway, UBS' top macro strategist, said in a note.
Investors were also spooked by the dimming outlook for the broader Eurozone area.
The latest European business confidence data signal an intensifying industrial recession and stagnating service sector -- raising the risk of economy-wide recession, Suki Cooper of Barclays Capital said.
The dollar, which competes against gold as a safe-haven investment, was the big gainer from investor flight from Europe, soaring to 79.395 on the ICE US Dollar Index, a level not seen since early this year.
Gold on the Comex climbed $39.10, or 2.37 pecent, to $1,661.40, while gold for immediate delivery rose $13.41 to $1,664.34.
Silver on the Comex was up $1.14 to $31.22, while silver for immediate delivery added 60 cents to $31.34.