Gold extends gains on Greece uncertainty

European Central Bank cancels soft treatment of Greek debt
Gold extends gains on Greece uncertainty
(Getty Images)
By Reuters
Thu 05 Feb 2015 12:04 PM

Gold rose for a second session on Thursday, supported by uncertainty in Greece that has cut investor interest in risky assets and China's efforts to spur its slowing economy.

But bullion was largely trading in a narrow range ahead of Friday's US employment data that may provide more clues on when US interest rates would rise this year, the first hike in nearly a decade.

The European Central Bank said it will no longer accept Greek bonds as collateral for its liquidity operations, dealing a blow to Athens which is seeking debt relief from euro zone lenders. Asian stocks retreated.

"We think the Greek issue will likely stir things up for a little while longer in the markets, which is why we think gold should benefit, likely at the expense of equities," INTL FCStone analyst Ed Meir said in a note.

Spot gold was up 0.1 percent at $1,271.40 an ounce by 0317 GMT, adding to a 0.8 percent gain on Wednesday.

U.S. gold for April delivery rose 0.6 percent to $1,272.20 an ounce.

China's move on Wednesday to cut the reserve requirement for banks in an effort to add more liquidity to fight off an economic slowdown and looming deflation also continued to support gold prices.

Beijing's move followed similar efforts by other central banks in the world to stimulate economic activity. Gold has historically benefited during periods of easier global monetary policies amid increased liquidity and low interest rates.

But investors were more focused on the next US nonfarm payrolls data. A Reuters poll of analysts has forecast for a 230,000 increase in US jobs in January, slowing slightly from 252,000 in December but still robust.

"The entire notion right now is for the U.S. to continue improving at least from the labour front," said Barnabas Gan, analyst at OCBC Bank.

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