Gold prices rose yesterday on a weaker dollar and were on course for their biggest monthly rise since August, raising the possibility of a climb toward last year's record high of just over $1,900 (Dh6,973) per ounce.
Sentiment for gold at the end of January compares starkly with late December, when prices dropped by more than 10 per cent in their biggest monthly fall since the collapse of Lehman Brothers in an investor dash for cash.
A $400 (Dh1,468) price drop from last September's record $1,920.30 had left investors questioning whether gold had ended an 11-year rally. Gold was up 0.6 per cent at $1,740.80 an ounce by 1143GMT, having earlier touched $1,744.80 — its highest since mid-December and up some 11.2 per cent on the month to date.
The euro rose against the dollar on hopes for a Greek debt restructuring deal that would help the country avoid a disorderly default, possibly setting itself up for a test of a key chart level. A weaker dollar makes gold cheaper for holders of other currencies. While recovering global share prices and hope of a deal for Greece tempered gold's safe-haven gloss on Tuesday, concerns about Portugal following a similar path to Greece and data pointing to a poor first quarter in the Eurozone kept the background environment supportive.
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More broadly, bullion was benefiting from a fav-ourable monetary policy backdrop, with a jump of almost 5 per cent last week after the US Federal Reserve pledged to keep interest rates near zero until at least late 2014.
"Interest rates remain low, Eurozone problems persist, the situation in Portugal got worse yesterday ... and now that we broke through $1,740 it looks like prices might go up," said Alexander Zumpfe, a precious metals trader at Heraeus in Germany.
A top US Federal Reserve official said on Monday he would have preferred a more optimistic statement on the US economy, after the central bank painted a grim picture of the recovery.