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Gold gains on Spanish bailout hopes, global monetary stimulus plans

CommoditiesSep 21, 2012 01:37PM ET
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Investing.com - Gold prices rose in U.S. trading on Friday on talk Spain is moving closer to seeking rescue financing.

The metal also saw continued gains stemming from central bank decisions around the world to stimulated their economies with monetary easing measures.

On the Comex division of the New York Mercantile Exchange, gold futures for October delivery were up 0.51% at USD1,776.85 a troy ounce, up from a session low of USD1,768.85 and down from a high of USD1,787.55 a troy ounce early during the session.

Gold futures were likely to test support at USD1,768.85 a troy ounce, the earlier low, and resistance at USD1,787.55, the earlier high.

The Financial Times reported earlier that Spain is moving closer to requesting a sovereign bailout and is currently working out the terms with European Union policymakers.

A bailout would allow the European Central Bank to step in and buy Spanish sovereign debt, which would lower borrowing costs in the large European economy.

Yields on Spanish 10-year bonds this year have repeatedly soared above the 7% threshold considered unsustainable by the markets.

The news sparked demand for the euro and other higher-yielding assets, which sent gold's traditional hedge, the dollar, falling in afternoon U.S. trading on Friday.

Meanwhile, gold continued to see support stemming from the Federal Reserve's recent decision to roll out a third round of bond purchases from banks, a monetary policy tool known as quantitative easing.

The European Central Bank and the Bank of Japan have unveiled similar monetary policy tools to jolt their respective economies, which further sent gold prices rising.

Stimulus tools tend to weaken paper currencies, the dollar especially, and make gold an attractive hedge.

Elsewhere on the Comex, silver for December delivery was down 0.04% and trading at USD34.668 a troy ounce, while copper for December delivery was up 0.74% and trading at USD3.787 a pound.








Gold gains on Spanish bailout hopes, global monetary stimulus plans
 

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