Traders and investors say safe-haven buying has fueled a spike in gold Tuesday morning as traders and investors rush in from sidelines into the precious metal.
December gold futures have surged nearly $50, topping $1,700 an ounce, while gold priced in Euros has rallied above 1218 an ounce, another key technical level.
Reports of the cancellation of a meeting of European finance ministersthat had been set to take place ahead of Wednesday's highly-anticipated summit of European leaders was one of the primary factors spurring buying, traders say.
The perception now: further monetary easing from the European Central Bank may ensue.
"The ECB will be brought into the mix whether they like it or not," says investor Dennis Gartman. "People are beginning to understand the ECB will be called in and they'll have to expand their monetary aggregates."
Also traders are watching political risks involving not only Greece, but more important Italy, after stark opposition to reform measuresproposed by Italian President Silvio Berlusconi's coalition government. These issues will be closely watched at Wednesday's EU summit.
More weak U.S. economic data also has added to the "safe-haven" trade with U.S. consumer confidence falling to a 2 1/2 year low, says precious metals analyst Bill O'Neill of Logic Advisors. HSBC precious metals analyst Jim Steel adds that gold traders have also been following the tremendous run-up in U.S. oil prices, which have gained $10 since Thursday to nearly $95 a barrel.
Open interest in gold futures has dropped dramatically over the past few weeks. "A lot of people are on the sidelines, they were in cash," says trader Kevin Grady. "Now people want gold as a piece of their portfolio."