Gold surged up today, rising after a freakish sell off in the middle of last week as the strength in Euro supported sentiments for the yellow metal. The commodity continued to move in line with the equities and rode the generally stronger momentum in global risky assets after Spain stated that it would seek a bailout for its banks, thereby easing some of the concerns about the health of the debt laden economy. The commodity gained above $1600 per ounce in intraday swings before easing and currently quotes under $1600 levels. Last week, Gold plunged more than 2% on Thursday after Federal Reserve Chairman Ben Bernanke warned that the U.S. economy faced “significant risks” arising from the crisis in Europe, but refrained from indicating that the central bank was prepared to implement any fresh stimulus measures.Risky assets stayed under pressure though the momentum was seen turning positive as Euro maintained its broad move higher against the US dollar. The currency tumbled to a two year low against the greenback but edged up above the 1.2500 levels on Friday even as Fitch cut Spain's credit rating by three notches to triple-B, and indicated that further cuts could still be made as the country struggles to stabilize its fragile banking system.However, global markets managed to recuperate some of the recent losses on reports that the euro zone finance ministers agreed to lend Spain up to 100 billion euros ($125 billion) for ailing its banks. Further, over the weekend, China released a flurry of economic reports that confirmed the world's second largest economy was in fact slowing more rapidly than analysts had projected and upped the hopes of further rate cuts from the country's central bank. China's industrial production grew 9.6% in May from a year earlier, versus 9.3% growth in April while inflation cooled. The May consumer price index edged up by 3%, easing from a rise of 3.4% in April, while the producer price index fell 1.4%.Euro moved up to a near two week high above 1.2600 levels today on these counts. The single currency was further boosted on reports that a German government spokesperson commented that Spanish bank bailout shows EU has crisis management under control. Though the currency slipped from highs of 1.2667 to quote at 1.2556 right now, it took Gold to a high of $1609.80 per ounce in the process. The shiny metal is quoting at $1592.80 per ounce, up $1.40 per ounce on the day. MCX August Gold futures are quoting at Rs 29706, up Rs 162 per 10 grams on the day. The upside bias is likely to continue in Gold and we should see a further rally towards Rs 29800 in New York trades.
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