SereneLoi.com

PRECIOUS – Gold Hits 1-Month High On Euro, May Test New Highs

* Gold hits 1-month high, few signs of physical selling
* Gold may test January high around $1,150 an ounce

SINGAPORE, Feb 22 (Reuters) – Gold jumped to its highest in a month on Monday as the U.S. dollar took a breather from a recent rally and fund buying picked up after the euro gained on talk about a speedy bailout for debt-ridden Greece.

Investors have poured money into gold as a hedge against currencies’ volatility due to fears about debt defaults in the euro zone, while the metal’s steady rebound since falling below $1,100 also ignited technical buying. Dealers expected gold to eventually test January highs around $1,150.

Spot gold hit an intraday high of $1,130.65 an ounce and was quoted at $1,126.55 by 0215 GMT, up $9.05 from New York’s notional close on Friday.

“It looks like there’s quite a solid support at $1,100 for the time being. We are waiting for Bernanke’s speech this week and some data, and will then see what happens,” said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.

“The dollar continues to weaken and we don’t see much selling around,” said Leung, referring to selling from the physical sector which normally happens when gold hits new highs.

Bullion was about 8 percent below a lifetime high above $1,200 an ounce struck in early December and was moving away from a three-month low around $1,043 hit almost three weeks ago.

The dollar fell as investors reassessed chances of a earlier-than-expected interest rate hike by the Federal Reserve, while a newspaper report about a plan by countries using euro to help Greece lifted the single currency.

Markets await Fed chief Ben Bernanke’s testimony in Congress on Wednesday and Thursday when investors will be looking for clues on rates after the Fed surprised many by raising the discount rate last week.

Gold initially dropped 1 percent on Friday after the announcement of the hike in discount rate before regaining strength as worries about volatility in currencies lingered. Billionaire investor George Soros said a makeshift assistance should be enough to rescue Greece but bigger problems facing Europe would leave the future of the euro currency in question.

Greece’s deficit swelled to 12.7 percent of gross domestic product in 2009, way above the EU’s cap of 3 percent. Greece has pledged to reduce its budget deficit to 8.7 percent in 2010.

U.S. gold futures for April delivery added $9.0 an ounce to $1,131.1 an ounce on Friday. It hit an intraday high of $1,131.50 on Monday, its strongest in a month. Gold priced in euros held near last week’s record around 830 euros.

“I think we’ve seen a bit of fund buying today, which is also driven by the fact that gold has managed to stay above $1,100 an ounce,” said another dealer in Hong Kong. The world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings stood at 1,107.596 tonnes as of Feb. 19, down 1.828 tonnes or 0.2 percent from the previous business day.

Non-commercial net long U.S. gold futures positions rose to 188,858 contracts in the week ended Feb. 16 from 181,519 contracts a week earlier, according to the weekly Commitments of Traders report published by the Commodity Futures Trading Commission. It was the first increase in a month.

U.S. oil prices rose above $80 a barrel on Monday, extending the previous session’s gains, supported by a weaker U.S. dollar, refinery strikes in France and escalating tensions about Iran’s nuclear programme.

#