Gold rallied late in the day after the euro rose sharply against the US dollar, driven by optimism over a new bailout deal for Greece.
Following a meeting with French President Nicholas Sarkozy, German Chancellor Angela Merkel said that the private sector should be involved in a new financial aid package for Greece on a voluntary basis. This marked a departure from Germany’s demands that private creditors should share the risks by rolling over its bonds.
Sarkozy added that he was in favour of a quick solution to Greece’s fiscal problems.
The European Union’s top economic official Olli Rehn helped lift sentiment, saying in an interview with Bloomberg that the EU will not let the euro area “face any kind of catastrophe”.
The euro surged on the back of the comments, pushing down the US dollar, which has an inverse relationship with gold.
Gold last traded at US$1,537/oz. Silver followed, rising to US$35.75/oz, while platinum pulled back to US$1,747/oz.
Mining stocks were on the rise today. Lonmin (LON:LMI) rallied 3 percent. Fresnillo (LON:FRES) and Randgold Resources (LON:RRS) tacked on 1 percent by midday UK time.
In the FTSE 250, African Barrick Gold (LON:ABG), Aquarius Platinum (LON:AQP) and Petropavlovsk (LON:POG) each added 1 percent.
Hochschild Mining (LON:HOIL) went against the tide, dropping 1.5 percent.
Saudi Arabia and Turkey focused gold and copper explorer KEFI Minerals (LON:KEFI) led the sector today, soaring 42 percent.
Exploration and development company focused on gold and high value base metals Stratex International (LON:STI) also did well, advancing 10 percent.
Emerging gold producer in Central Asia Anglo Asian Mining (LON:AAZ) climbed 7.5 percent, while gold and silver explorer Patagonia Gold (LON:PGD) and Mariana Resources (LON:MARL), which is focused on copper-gold prospects in South America, rose 6 percent.