Gold holds above $1,640 per oz after Spanish auction

Thu Apr 19, 2012 6:28am EDT
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By Jan Harvey

LONDON (Reuters) - Gold prices clung onto early gains on Thursday, ending four days of losses after a widely-anticipated auction of Spanish debt supported the euro and appetite for so-called higher-risk assets like stocks and commodities.

Prices remained range bound, however, as yields ticked higher on the longer dated paper than in a previous auction in January, with the precious metal failing to build on a session high touched in the immediate wake of the sale.

Spot gold was up 0.1 percent at $1,643.70 an ounce at 6:01 a.m. EDT (1001 GMT), while U.S. gold futures for June delivery were up $4.90 an ounce at $1,644.50.

Spain's Treasury issued 2.5 billion euros ($3.3 billion) in 2- and 10-year bonds on Thursday, at the top end of the targeted amount and on solid demand.

"There was a very good bid-to-cover ratio, (though) the yields indicated are a little higher than the previous auction," LGT Capital Management analyst Bayram Dincer said. "The euro-dollar reaction post-auction was positive, which also benefited the gold price, and risk-on sentiment improved."

While the euro failed to build on its earlier session highs, it remained up 0.2 percent against the dollar as markets digested the sale. European shares .FTEU3 also stayed in the black, albeit off the highs of the day. <FRX/> <GVD/EUR>

Attention is now turning across the Atlantic, to a Federal Reserve meeting next week, at which policymakers will discuss U.S. monetary policy. <FED/AHEAD>

Gold traders are awaiting fresh clues on whether a third round of quantitative easing, which would keep interest rates, and consequently the opportunity cost of holding bullion, at rock-bottom levels, is on the cards.   Continued...

Gold Bullion from the American Precious Metals Exchange (APMEX) is seen in this picture taken in New York, September 15, 2011. REUTERS/Mike Segar