Gold rises as dips are bought, euro strength supports

Gold moved back through $1,370 on Tuesday morning, aided by dip buying amid lingering fears over eurozone debt levels and a falling dollar.

Spot gold struck a two-day peak of $1,371.78 per ounce this morning before settling at $1,367.60/1,368.40, still $6.62 higher.

From a technical perspective, resistance is now set at the 50-day moving average of $1,380.90 and then at $1,381 and $1,393. Support is pegged at $1,355, $1,353/1,351 and $1,330/$1,329.

"Continued concerns about the sovereign debt problems facing peripheral eurozone nations is providing support for gold this morning, as demand remains for wealth protection and the recent decline in prices encourages investors back into the market," analyst John Meyer of Fairfax said.

Today marks the conclusion of a two-day meeting by European finance ministers to discuss the possible expansion of the eurozone's 750-billion-euro ($1 trillion) bailout fund, with fears of sovereign debt contagion across the region continuing to swirl.

On Friday, ratings agency Fitch cut Greece's rating to junk, following downgrades for Ireland, Portugal and Hungary in recent weeks. And many market experts believe that Portugal will soon be forced to seek a financial rescue package.

A softer dollar helped to propel precious metals higher - the US currency struck a low of 1.3428 against the euro before settling at 1.3395, still well over a cent lower on the day. European equities were 0.9-1.1 percent higher.

Eurozone data this morning helped underpin the euro. EU ZEW economic sentiment numbers for January came in at 25.4, ahead of an expected 17.3 and rising from 15.5 previously. And German ZEW economic sentiment, at 15.4, exceeded forecasts of 6.5, rising from 4.3 in December.

"This is very positive data for the EU and for Germany, especially with the ECOFIN meeting due to take place today," analyst Jono Remington-Hobbs of FastMarkets said. "With the commodity complex responding well to a weaker dollar this morning, we would assume that this data will also be supportive for the metals complex."

Earlier, UK inflation hit its highest since May last month - it came in at 3.7 percent, well above last month’s reading of 3.3 and exceeding the Bank of England's two-percent target.

With US markets returning after the Martin Luther King Jr one-day holiday, Empire State manufacturing, TIC long-term purchases and NAHB housing market numbers are due this afternoon.

In news, Estonia has become the 19th country to join the Central Bank Gold Agreement (CBGA3), according to broker Commerzbank.

Under the latest accord - now in its second year - the annual sales quota for central banks was lowered to 400 tonnes from 500 tonnes previously, signalling their reluctance to sell reserves in the current macroeconomic climate.

In other precious metals, silver, which had sunk to a fresh low since December 10 at $28.05 per ounce in the previous session - was steadier today at $28.75/28.80, a 43-cent gain.

Platinum was spritely, hitting an intraday high of $1,827.50 per ounce and just off Thursday’s two-and-a-half-year peak of $1,829. It was last at $1,818.70/1,823.70, up $12.20.

Palladium barged back through $800, gaining $12.75 to $804.25/809.25 per ounce.

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