Forex News – Gold rises sharply on Greece bailout

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Gold rose for a second day today, taking its cue from a rally in the euro after European finance ministers struck a deal with Greece on a second bailout package, early Tuesday morning in Brussels.

Euro zone finance ministers signed off on a 130 billion euro bailout for Greece to avert a disorderly default in March when bond redemptions are due, after persuading private bondholders to take greater losses on holdings of Greek debt. Also the Greek government agreed to commit to deeper cuts.

Spot gold rose around $20 on the day to $1,749.27 an ounce by 1502 GMT,  the highest level in 12 days. Most active U.S. April golf futures rose nearly 0.9 percent to $1,740.60 an ounce.

Gold has recently been trading more like other metals, as a risk asset, rather than a risk hedge. It has been taking direction from the euro. Gold’s correlation with the single currency is holding close to 50 percent, compared with a correlation of around just 30 percent two weeks ago, indicating that it is more likely to move in tandem with the euro than against it.