Spot gold rose 0.7 percent to $1,770.79 an ounce on Friday

Gold rose on Friday in line with a pick-up in the euro, which gained on the back of investor optimism that new governments being formed in Italy and Greece will swiftly enact austerity measures in a bid to stave off the region’s debt crisis.

Italy approved austerity measures needed to reduce its debt burden and regain the confidence of capital markets, which this week have pushed the yields on its benchmark 10-year bonds into what economists perceive as a “danger zone” above 7.0 percent.

Spot gold rose 0.7 percent to $1,770.79 an ounce by 1525 GMT and was on course for a third straight week of rises
with a 1.0 percent gain.

U.S. gold rose 0.8 percent to $1,775.00.

“Gold is starting to consolidate above $1,750. For sure, there will be more profit-taking from those people that
went long … it could come off to $1,705 but I think we will settle here for a while,” said VTB Capital analyst Andrey
Kryuchenkov.

“The downside in gold is more protected because that is well supported at the moment,” he said, adding: “The broader market clings to any sort of good news and to anything that is mildly positive. What the FX and bond markets are telling us right now, with Italian 10-year yields, and the spreads of France and Italy versus Bunds, coming off is that there is a bit of improvement in sentiment.”
Italy has overtaken Greece as the main focus of the euro zone debt crisis this week, with yields on its benchmark 10-year bonds rising on Wednesday as high as 7.5 percent, which is considered to be an unsustainable level.

They have since retreated below 7 percent, though investors remain concerned that Euro zone’s third-largest economy could buckle under its 2 trillion euros of debt. Unlike Greece, Italy is too big to bail out.
In Greece, the prime minister designate, Lucas Papademos, will name a new crisis cabinet to roll out austerity plans. – Reuters

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