Gold Prices and Euro Rise as Europe Supports Growth of Euro Zone
Gold prices have been on the rise as European leaders expect to sign a bailout deal for Greece that will lift the value of the euro.
Spot gold prices were up by 0.6 per cent at $1,734 an ounce, Monday, according to a Reuters report. Gold prices are up nearly 11 percent for 2012 and benefiting from an upsurge in the euro.
Gold prices have risen more than 10 percent this year. The growth is supported by loose monetary policy in the U.S. and the euro zone. This cuts the opportunity cost of holding gold metals and boosts its appeal as a store of value, according to the Gulf News.
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The uncertainty of the euro zone supports the rise in gold-trading, according to Morgan Stanley.
"The defensive nature of gold should continue to support investment demand as investors look for safe havens," said Morgan Stanley in a statement.
The euro also rose 0.5 percent after China relaxed monetary policies to stimulate growth. Policymakers are also set to approve a second bailout deal for Greece to avoid a default.
Greek political leaders struggled last week to reach a deal on a deficit-cutting policy demanded by the European Union and International Monetary Fund in return for the bailout deal, according to Gulf News.
Euro zone finance ministers are expected to approve the bailout deal for Greece, which is worth 130 billion euros ($172 billion), sometime Monday. The bailout deal is expected to put the brakes on months of turmoil that has shaken the currency bloc.
VTB Capital said that the market's attention needs to remain on the development in the euro zone while the finance ministers finalize the bailout deal.
"We see subdued action today as a positive decision on Greece is pretty much priced in," VTB said in a statement.
Relief over the signing of the bailout deal led to an increase in the euro of 0.7 per cent against the dollar yesterday. However, investors are still skeptical about the strength of the euro's gains.
