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Concern Over Rome Roils Gold Market

Gold surged to more than $1,790 an ounce on Monday, touching a six-week high as investors continued to pile into the traditional safe haven on an intensifying European crisis that has brought Italy's debt woes into the forefront.

Gold Bars
AP
Gold Bars

In afternoon trading, December gold futures advanced 2 percent with a more than $36 jump closing in on the $1,800 an ounce mark. Spot gold also surged.

"With this European situation, the train goes from Athens to Rome and possibly Madrid could be next," says analyst Bill O'Neill of Logic Advisors. "There is tremendous uncertainty and the lack of desire to hold any currency. That is the primary reason for the strength in gold. It's been the main driver for the last two years."

Concern about a crisis in Italy has trumped the Greek crisis, agrees analyst Oliver Jakob of Petromatrix, "As long as the yields on the Italian bonds continue to increase /despite the European Central Bankbuying them, it will be difficult to be overly optimistic over the fate of Europe and of the euro," he wrote to clients this morning.

SPDR Gold Trust holdings rose to its highest level in more than a month on Friday and investors have steadily increased their positions in gold futures. Net-long positions in metal advanced nearly 7 percent to the most in 6 weeks, according to the CFTC, the second weekly increase in a row.

"What I like is that it's been a steady climb higher for gold," says NYMEX floor trader Mihir Dange of Arbitrage LLC. Gold prices have risen $240 since falling to a near-term low of $1535 on September 26. "Even Germany wants to hold onto its gold." He says a settlement price for gold above $1775 and continued gains in the overnight session could send gold prices above $1800.

"What I like is that it's been a steady climb higher," says NYMEX floor trader Mihir Dange of Arbitrage Trading. Gold prices have risen $240 since falling to a near-term low of $1535 on September 26. "Even Germany wants to hold onto its gold."

Over the weekend, German newspapers reported that Group of 20 nations (G20) leaders had discussed the idea that German gold could be used to underpin the European Financial Stability Fund , but the plan was quickly discarded and rejected by senior German officials, including German Chancellor Angela Merkel.

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