Gold surges on renewed Greek fears

Investing.com - Gold futures surged Wednesday, rallying to a four-day high , as fears of a Greek default boosted the metal’s safe haven appeal

On the Comex division of the New York Mercantile Exchange, gold futures for April delivery traded at USD1,728.45 a troy ounce during mid U.S. trade, surging 0.63%.      

It earlier rose by as much as 1.3% to trade at USD1,739.15 a troy ounce, the highest since February 9.

Futures were likely to find support at USD1,713.95 a troy ounce, Tuesday’s low and resistance at USD1,754.95, the high from February 9.

The precious metal’s price surged after Reuters reported that European Union is looking at ways to delay the second bailout amid concerns that political leaders in Greece are not fully committed to implementing harsh austerity measures demanded by international creditors.

According to the article, top-rated sovereigns Germany, Finland and the Netherlands are leading the push to delay Greece's bailout until April.

Without a bailout, Greece faces the threat of defaulting when a EUR14.5 billion bond redemption comes due on March 20.

European finance ministers cancelled a meeting with Greece officials today to sign off on the second Greek bailout package, after failing to obtain assurances from Athens that the austerity measures will be implemented.

Ministers are expected to hold a teleconference ahead of the official meeting rescheduled for Monday.

In euro zone positive news, the head of China’s central bank stated that he believes the euro zone debt crisis can be solved. He vowed to become more involved in the debt crisis via facilities like the European Financial Stability Facility.

In addition, data showed that Germany’s economy fell less than expected 0.2% in the last three months of 2011, while France’s economy expanded 0.2% and Italy’s shrank by 0.7%.

In gold bearish news, hedge fund manager and long-time gold bull John Paulson reduced his gold holdings by nearly USD600 million during the fourth quarter, according to a filing with the Securities and Exchange Commission  on Tuesday.   

Paulson & Company reduced its stake in the SPDR Gold Trust, the biggest exchange-traded fund backed by the precious metal, to 17.3 million shares in the final three months of 2011 from 20.2 million in the third, a second straight reduction that was likely driven by client redemption needs.

Many gold traders have been concerned about selling by Paulson and what that would do to investor psychology in the gold market. Gold prices tumbled 11% in September amid widespread talk of possible selling by big hedge funds covering losses in other markets.

However, other major market players added to their holdings, with billionaire financier George Soros modestly increasing his position in the ETF to around USD13 million in the fourth quarter.

Major institutional investors, including PIMCO and the Teacher Retirement System of Texas also boosted their GLD holdings.

Elsewhere on the Comex, silver for March delivery was higher by 0.01% to trade at USD33.35 a troy ounce, while copper for March delivery gave back 0.22% to trade at USD3.81 a pound.