Gold rises with equities on optimism over EU summit

Reuters, Saturday 22 Oct 2011

Precious metal posts its biggest one-day gain in two weeks ahead of Franco-German talks

Gold rose 1 per cent on Friday, breaking a four-day losing streak, as bullion moved in sync once again with riskier assets on optimism European leaders will be able to contain the region's debt crisis.

Gold posted its biggest one-day gain in two weeks as Wall Street and commodities rallied after the euro zone's two biggest powers France and Germany said they would meet twice -- on Sunday and Wednesday -- to prevent the crisis from engulfing the entire 17-nation currency area.

The metal was 2.5 per cent lower for the week, its biggest decline in four weeks, falling in tandem with riskier assets such as equities and industrial metals.

Gold option volatility has increased this week as calls were bid up by funds seeking a hedge against downside risks for their futures positions amid high uncertainty about the situation in Greece and the EU.

"As the moves are getting larger again, that is definitely a sign that volatility will be coming back in the market as investors are interested in participating into gold again," said Mihir Dange, COMEX gold options floor trader for Arbitrage.

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