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Gold Settles Near $1660 on Euro, Equities Gains

Published: Wednesday, 18 Jan 2012 | 4:29 PM ET

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By: Reuters

Gold rose on Wednesday on gains in the euro and U.S. equities and optimism that the International Monetary Fund will raise additional funds to help combat Europe's debt crisis.

Don Farrall | Getty Images
Bullion was on track for a third consecutive day of gains in decent trading volume after U.S. investment bank Goldman Sachs' earnings beat estimates and increased investor appetite for risk.

But traders were cautious after gold lost 10 percent in December and a respected precious metals consultant warned the metal's decade-long bull run may be near an end.

"If the European situation doesn't get resolved, which has been priced into the market, we could be right back to asset-allocation type selling in a fairly short order," said Frank McGhee, head precious metals trader at Integrated Brokerage Services LLC.

McGhee said that gold could also sell off if China does not implement any kind of stimulus, as move that has been broadly anticipated by the markets.

Spot gold [XAU= Loading... () ] was up 0.4 percent at $1,658.15 an ounce by 12:50 p.m.

The metal rose on Tuesday after weak growth suggested that China may try to boost productivity through monetary easing.

U.S. gold futures [GCCV1 Loading... () ] gained $4.30 an ounce to settle at $1,659.90.

COMEX gold options floor trader Jonathan Jossen said that the order flow was "very bullish," with good-size trades of call options at higher strike prices.

Gold fell earlier in the session. Traders cited a bearish industry report on Tuesday by metals consultancy GFMS that the metal is nearing the end of a decade-long run as the macroeconomic backdrop changes and investment in gold fades.

Silver [XAG= Loading... () ] rose 1.3 percent to $30.46 an ounce.

Silver prices fell sharply last year after hitting a record near $50 an ounce in May, and underperformed gold in the full year as they fell 10 percent against gold's 10 percent rise. Silver's ratio to gold is currently at around 55, up from 32 in April.

Spot platinum [XPT= Loading... () ] traded flat at $1,519.49 an ounce, while spot palladium [XPD= Loading... () ] was up 2.4 percent at $664.45 an ounce.