Forexpros – Gold futures climbed to the highest level of the day on Thursday, as the U.S. dollar weakened after European Central Bank President Mario Draghi confirmed reports that Greece had finally agreed on a package of austerity measures.
On the Comex division of the New York Mercantile Exchange, gold futures for April delivery traded at USD1,748.65 a troy ounce during early U.S. morning trade, gaining 1%.
It earlier rose by as much as 1.15% to trade at a session high of USD1,751.15 a troy ounce.
Futures were likely to find support at USD1,712.65 a troy ounce, the low from February 7 and short-term resistance at USD1,754.65, Wednesday’s high.
According to government sources, Greek Prime Minister Lucas Papademos declared that an agreement was reached and endorsed by the major Greek political parties on a set of new austerity measures needed in order to secure a second bailout package.
ECB President Draghi later confirmed the news at his press conference after the ECB’s policy meeting, in which it kept interest rates on hold at 1%.
“I got a call from the Prime Minister of Greece that an agreement has been reached and has been endorsed by the major parties,” Draghi said.
The news came only hours before a meeting of euro zone finance ministers in Brussels to discuss the Greek EUR130 billion bailout.
The news helped lift the euro to an eight-week high against the U.S. dollar, while the dollar index, which tracks the performance of the greenback against a basket of six other major currencies, declined 0.26% to trade at 78.51.
Dollar weakness usually benefits gold, as it boosts the metal’s appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.
Gold prices found additional support after the Bank of England increased its quantitative easing program by GBP50 billion earlier, citing the “significant margin” of slack in the British economy and left interest rates unchanged at 0.5% in a widely expected decision.
Gold can benefit from such an environment of easy money because of expectations that ample liquidity would put a damper on the value of paper currencies.
Gold prices edged higher during the Asian trading session after China’s National Bureau of Statistics said consumer price inflation rose by a seasonally adjusted 4.5% in January, accelerating from 4.1% in December.
Month-on-month, the consumer price index rose 1.5% in January from a month earlier, the largest monthly gain in four years.
Investors often purchase gold as a hedge against rising inflation, as gold prices tend to keep in step with consumer price increases.
Elsewhere on the Comex, silver for March delivery jumped 1.65% to trade at USD34.26 a troy ounce, while copper for March delivery rallied 1.4% to trade at USD3.964 a pound.
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