Gold hovers near high

Gold held near $1,600 (Dh5,876) an ounce yesterday, supported near this week's record highs by caution ahead of a key Eurozone summit and as concerns persisted over talks to raise the US debt ceiling, a necessary move to avoid a default. However, it struggled to make fresh gains as appetite for risk improved after Germany and France reached a common position ahead of the summit, at which leaders will try to agree on a second bailout package for debt-laden Greece. Spot gold was flat at $1,599.29 an ounce. It has risen 12.8 per cent so far this year. "The EU summit... and the deadlock in the US debt issue discussions are curbing the metal in narrow range," said Pradeep Unni, senior analyst at Richcomm Global Services. "It's almost certain that Greece will be bailed out, and Germany and France have given their consent." Article continues below "[If we have] a bailout proposal for Greece and... if a temporary solution is reached in United States, expect gold to spike down to the 1,559-1,555 zone." The metal hit a record $1,609.51 an ounce on Tuesday on fears the Eurozone debt crisis that has battered Greece would spread to larger economies like Spain and Italy, but later retreated as some cautious optimism emerged. Safe-haven German government bonds opened lower yesterday, while the premium investors demand to hold lower-rated Eurozone government bonds rather than Bunds fell. Agreement The euro firmed against the dollar after officials said Germany and France had reached a common position on a second bailout of Greece in their effort to prevent the country's debt crisis from spreading through Europe. The accord, details of which have not been released, will be presented to a crisis summit of all 17 leaders of the bloc in Brussels. The new bailout would supplement a €110 billion (Dh528 billion) rescue plan for Greece launched in May last year. It is expected to include fresh emergency loans to Athens from Eurozone governments and the International Monetary Fund, and possibly a range of other measures. "With expectations for the meeting low, any positive outcome today would be gold-negative," said UBS analyst Edel Tully in a note. "But unless EU leaders come up with a credible plan that addresses not only Greece but also the threat of contagion to Italy and Spain as well, any dip in gold will likely be short-lived." Meanwhile, President Barack Obama and top lawmakers face growing pressure yesterday to strike a deficit-reduction deal. They have struggled to break their impasse as an August 2 deadline looms for raising the government's $14.3 trillion debt ceiling. A failure to do so could render the world's biggest economy unable to pay its bills, potentially reducing the safe-haven appeal of US Treasuries and the dollar, and lifting gold. Silver Spot silver eased 0.9 per cent to $39.74 an ounce. The gold-silver ratio, used to measure the ounces of silver needed to buy one ounce of gold, held near 40, well below the average of 55 since the beginning of 2010 but above the April lows near 30 when silver rose close to $50. Demand for products like silver-backed exchange-traded funds remained choppy, with the largest, New York's iShares Silver Trust, recording its largest one-day outflow in a month on Wednesday, with its holdings falling 60.6 tonnes.