Gold and euro rise as dollar extends losses

London: Gold rose more than 1 per cent yesterday to a session high of $1,154.35 an ounce as the dollar extended losses against the euro after Germany said it was ready to make a contribution to Greek aid.

Germany's finance minister said the country is ready to make its contribution to an aid package for Greece if the International Monetary Fund, the EU Commission and the European Central Bank decide Athens needs the help.

Spot gold was bid at $1,152.55 an ounce at 1503 GMT against $1,140.45 late in New York on Thursday. US gold futures for June delivery on the Comex division of the New York Mercantile Exchange rose $10.80 to $1,153.70 an ounce.

The Greek debt crisis can be viewed as both positive and negative for gold, as it tends to pressure the euro, which is negative for dollar-priced commodities, but boosts interest in bullion as a haven from financial risk.

"The currency aspect [of the gold market] is more short term," said VM Group analyst Matthew Turner. "If there is a bailout, the euro will rise and gold will rise in dollars, and if the situation gets worse, we will see gold under pressure."

"But in the medium term, this uncertainty is good for gold, even though it is bad for the euro. As there doesn't seem to be a quick solution to the problem, it is something that will keep gold supported over the rest of the year."

Gold priced in euros rose to a peak of 863.67 euros an ounce after the news, close to the record high of 864.75 euros an ounce it reached earlier this month.

The link betweek the dollar and gold has weakened in 2010, with gold prices rising 4 per cent since the start of the year despite the dollar's 7 per cent climb versus the euro.

Prices also received a boost after above-consensus US new homes data lifted appetite for assets seen as higher risk, like the euro and commodities. Concern over Greece pushed the single currency to one-year lows in earlier trade.

Among other commodities, oil prices rebounded as the euro recovered, having earlier weakened as Greece's request for financial aid failed to soothe nerves over the outlook for the beleagured eurozone member.

Wall Street stocks added to gains after data showed sales of newly built single-family homes rebounded strongly in March to their highest level in eight months.

Barclays Capital analyst Suki Cooper said gold is benefiting from better appetite for the metal among short-term investors, adding she expects gold's relationship to the euro-dollar to weaken as the year progresses.

"Other concerns, like inflation and sovereign debt risk, will come into play more, and we will see investors turning to gold," she said.

Silver was at $18.14 an ounce against $17.95, platinum at $1,736 an ounce against $1,740, and palladium at $560 against $561.

Autocatalyst materials platinum and palladium are succumbing to profit taking, dealers said. Their gains have outstripped those of other precious metals this year amid expectations car demand will rise after last year's slump.

Precious metals