21/05/2011
Gold jumps 1.5 percent on euro zone debt fears
(Reuters) - Gold rose 1.5 percent on Friday, its biggest daily gain in two weeks, on safe-haven buying as investors fretted about euro zone debt after Fitch cut Greece's credit ratings.
Bullion fell early in the session before turning higher after Fitch downgraded Greece's rating and as the International Monetary Fund urged Europe to agree to more comprehensive measures to tackle the debt crisis.
The euro fell against the dollar on caution before upcoming Spanish elections this weekend and the uncertain Greek debt situation. Crude oil and commodities reversed early losses as the dollar pared gains, and the euro zone worries boosted gold and silver.
"A lot of the move this morning is prompted by the move of the dollar. That dollar strength is probably short-lived...It has largely run its course and may soon begin to reverse," said Jeffrey Kleintop, chief market strategist of LPL Financial, which has $100 billion in assets under management.
Spot gold rose 1.5 percent to $1,514.49 by 2:52 p.m. EDT (1852 GMT). U.S. June gold futures settled up $16.50 at $1,508.90 an ounce, after trading between $1,486.40 and $1,515.80, which marked a one-week high.
Gold is up 1.5 percent for the week. The metal is still 4 percent lower after rallying to a lifetime high near $1,575 an ounce in early May.
Silver was up 0.6 percent at $35.16, but remained down 30 percent from the record $49.51 hit on April 28.
Bullion has dropped three out of the last four sessions on weak U.S. housing and manufacturing data and uncertainty about the end of the Federal Reserve's bond-buying program.
"This week, we've had one of the worst weeks for economic data so far this year, as most of the data came in below expectations. I don't think that will be the case next week," said Kleintop, whose firm has an overall commodity allocation of between 10 to 20 percent.
Managed money sharply scaled back their bullish bets in COMEX gold futures and options to the lowest level since March as prices fell sharply, U.S. regulator data showed.
Investor sentiment took a toll on Monday when billionaire financier George Soros dumped almost his entire $800 million stake in bullion in the first quarter, well before a commodities slump blamed partly on reports he was liquidating his holdings, regulatory filings showed.
