Gold surges as dollar extends losses vs euro

Gold rose to 6-1/2 week highs at $1,141.70 an ounce yesterday as the dollar extended losses versus the euro, and as broader fears over the outlook for paper currencies lent further support to the precious metal.

Spot gold was bid at $1,139.95 an ounce at 1537 GMT, against $1,134.50 late in New York on Tuesday.

US gold futures for April delivery on the Comex division of the New York Mercantile Exchange rose $3.3 to $1,140.70 an ounce.

Prices are benefiting not only from dollar weakness, which boosts gold's appeal as an alternative asset and makes dollar-priced commodities cheaper for other currency holders, but from fears over financial instability in general.

"The market is looking for some security with gold," said Commerzbank analyst Eugen Weinberg. "The problems in the euro zone, and the problems in Greece, may well pull people into the gold market as they look for diversification and security."

The euro extended gains against the US unit yesterday to hit the day's high as a Greek Government source cited details of fresh plans to tackle Greece's debt problems.

The Greek Government endorsed a €4.8 billion (Dh24bn, $6.55bn) austerity package, but markets were wary over whether it would be enough for Athens to win financial support from its European partners.

Concern over the fiscal health of peripheral euro zone economies such as Greece, Italy and Spain have weighed heavily on the euro this year. It is currently down nearly 5 percent versus the dollar in 2010.

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