Gold rises on ECB action hopes, subdued dollar

Fri Jul 27, 2012 7:09am EDT
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By Susan Thomas

LONDON (Reuters) - Gold rose on Friday, holding around a three-week high as the dollar softened a touch and stocks gained on hopes a vow by the European Central Bank chief to prevent a collapse of the euro zone signaled more action to tackle the debt crisis.

The euro fell against the dollar, after rallying to a two-week high on ECB President Mario Draghi's comments on Thursday, helping gold to hold onto gains well above $1,600, while world stocks rose. The dollar was flat against a basket of currencies. .DXY

A French newspaper also reported that the ECB and euro zone governments were preparing co-ordinated action to cut Spanish and Italian borrowing costs, further underpinning the rise in financial markets.

Gold has been particularly sensitive to moves in the wider financial markets in the absence of direction from physical demand, which has been weak in recent months. It tends to benefit from dollar weakness and sharper appetite for risk.

Spot gold was up 0.5 percent at $1,624.60 an ounce at 6:24 a.m. EDT (1024 GMT), off a session high of $1,625.10, its highest level since June 19. Gold has risen for the fourth session running.

U.S. gold futures for August delivery were up 0.5 percent at $1,623.40 per ounce.

"The biggest concern is the momentum. We've seen these moves higher on a number of times in past week but it doesn't seem to have much conviction," said Ross Norman, chief executive of precious metals trader Sharps Pixley.

"We need to see ongoing rallies of the sort we've seen in the last few days to convince the market that this is not just a relief rally but something more sustained."   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