Gold rose more than 1 percent on Friday, on track for its largest two-day gain since October, boosted by investors' consolidation of positions ahead of the weekend and a stronger euro.

The second day of gains helped bolster confidence, which had been shaken by gold's fall earlier this week to a four-month low at $1,527 an ounce, near critical long-term support levels.

But traders remained cautious given how the escalating crisis in Europe has driven the single currency lower this month.

"There is still no conviction in the market. If gold was a safe haven, it should be higher. Physical demand is mediocre and the Europeans want the dollar, which is why it is so strong," a physical U.S. gold trader said.

The psychologically important $1,600-per-ounce mark remained elusive.

It got close, hitting an intraday high of $1,597.4 an ounce in late morning, before meeting technical resistance and easing back to around $1,590.

Spot gold was up 1 percent at $1,588.96 an ounce at 2:06 p.m. EDT, while U.S. gold futures for June delivery settled 1.08 percent higher at $1,591.9.

That takes gold up 0.6 percent on the week, snapping two weeks of losses, and brings it back to positive territory year-to-date, with a 1.5-percent rise.

While it was a far cry from the 14-percent gain in February when prices came close to $1,800 an ounce, bullion outpaced the U.S. equity market after Facebook's much-anticipated debut stumbled after a delayed opening.

Trading on Friday returned to familiar trends, tracking the euro, which recovered from four-month lows against the dollar, though concerns over a Greek euro exit and instability in the Spanish banking system weakened confidence. <FRX/>

MOMENTUM KEY

"To see a return of gold reacting positively to macro stresses is indeed refreshing, but it is still far too early to make any firm conclusions from here that gold has indeed turned the corner," UBS said in a note.

"Momentum will be key, and follow-through buying will have to kick in to encourage investors to jump in."

Holdings of gold-backed exchange-traded funds tracked by Reuters, which issue securities backed by physical metal, edged up 76,000 ounces on Thursday, but remained under the 70-million-ounce level they slipped below a week ago.

Among other precious metals, silver gained 2.18 percent at $28.64 an ounce.

The gold/silver ratio, which measures the number of silver ounces needed to buy an ounce of gold, touched 56.6 this week, its highest since late December, easing back on Friday to around 56 as silver outperformed gold in a rising market.

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Gold rose to a one-week high on renewed speculation that the Federal Reserve will announce additional stimulus to boost the U.S. economy, increasing demand for the precious metal as an inflation hedge.

Bullion jumped 2.5 percent yesterday, the most since October, after a report showed that manufacturing in the Philadelphia region unexpectedly shrank in May, the first contraction in eight months. Before yesterday, gold was in a bear market, erasing this year’s gain, as Europe’s widening debt crisis sent investors to the safety of the dollar. The Fed has held U.S.borrowing costs at a record low since 2008 and bought $2.3 trillion in housing and government debt to spur growth during two rounds of so-called quantitative easing.

“Expectations of some form of easing have perked up the market,” Phil Streible, a senior commodity broker at R.J. O’Brien & Associates in Chicago, said in a telephone interview.

Gold futures for June delivery gained 1.1 percent to settle at $1,591.90 an ounce at 1:47 p.m. on the Comex in New York. Earlier, the price rose to $1,597.50, the highest since May 10. The metal is up 1.6 percent for the year, heading for a 12th straight annual gain.

Fed Chairman Ben S. Bernanke on April 25 said he was prepared to take further action to aid the economy if necessary.

Moody’s Investors Service lowered the credit ratings of 16 Spanish banks yesterday, and Fitch Ratings cut Greece’s credit rating on concern that the country may not be able to sustain euro membership.

‘Too Early’

“To see a return of gold reacting positively to macro stresses is indeed refreshing, but it is still far too early to make any firm conclusions from here that gold has indeed turned the corner,”Edel Tully, an analyst at UBS AG in London, wrote in a report today. “Follow-through buying will have to kick in to encourage investors to jump in.”

Silver futures for July delivery rose 2.5 percent to $28.715 an ounce on the Comex.

On the New York Mercantile Exchange, platinum futures for July delivery climbed 0.4 percent to $1,459.30 an ounce, rising for the second straight day. Palladium futures for June delivery fell 0.4 percent to $603.60 an ounce.

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Gold futures continued to rebound Friday as the U.S. dollar lost steam and weakened in relation to other major currencies, leaving the metal open for a small advance after two weeks of losses.

Gold for June delivery rose $17, or 1.1%, to $1,591.90 an ounce on the Comex division of the New York Mercantile Exchange.

On the week, the metal gained 0.5%.

“The move up is largely a bounce back from the steep declines we had been seeing in the last two weeks,” said Rohit Savant, an analyst with CPM Group in New York.

Gold prices will likely face some resistance if they try to go beyond $1,630 an ounce, he added. Prices have largely moved lower since the beginning of the month, Savant said.

So far in May, gold has lost 4.3%.

Gold jumped 2.5% in Thursday’s North American session, finding some support around $1,550 an ounce in a reversal from heavy selling seen earlier this week.

Investors remained skittish about investments considered riskier such as commodity and equity markets, as fears of a run on banks moved to Spain and hurt confidence worldwide.

The fear has rendered many commodities futures “severely oversold, and nowhere is this more evident than in silver,” said Edward Meir, with INTL FCStone

July silver turned around as well, and ended the day up 70 cents, or 2.5%, to $28.72 an ounce. The gains were not enough to push silver higher on the week, however. The metal ended the five-day period off 0.6%.

Copper for the same month’s delivery turned lower as the day progressed, and settled down 1 cent, or 0.3%, to $3.47 per pound. Weekly, copper lost 4.9%.

Against a backdrop of escalating Europe worries, the dollar had extended a recent string of strength in early trading, but it let that advantage slip. The dollar index, which measures the U.S. unit against a basket of six currencies, declined to 81.278, off from 81.454 late Thursday.

A stronger greenback can pressure dollar-priced commodities including metals as it makes them more expensive to holders of other currencies.

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Wearing its greatest debt burden since WWII, the UK government can now borrow for 10 years at less than 1.9% per annum. The US Treasury is paying 2.9% per annum on 30-year debt.

Does anyone really expect a yield of less than 3% to beat inflation between here and 2042...?

Yet the price of gold – the anti-debt – keeps falling, and it keeps falling despite the imminent failure of Greece's Euro membership and the looming collapse of Europe's banking system. Some €700m per day is being pulled from Greek banks. Global stock markets have fallen over 7% already this month, the broad commodity markets have fallen for 10 out of 11 days, and crude oil is trading at a 6-month low, down 15% from February.

But the distinct differences of gold – un-inflatable, economically useless (relatively speaking) incorruptible gold, with its zero credit risk and 5,000 years of monetary use – count for nothing. In Dollar and Sterling terms, it's now back where it started last summer's big move.

That's precisely what happened in late 2008, when the collapse of Lehman Bros. – and the missed opportunity to let every other over-leveraged investment fraud go bust as well – drove equities, commodities and gold sharply lower.

By mid-October 2008, gold had re-traced the entire surge that started with Bear Stearns' hedge-fund failures of mid-2007, running to the peak above $1000 per ounce when Bear Stearns itself failed into the loving embrace of J.P.Morgan the following March.

Here again in 2011-2012, the crisis proved good for gold at first, but the whole move has been unwound as global credit deflation sucked the air out of Gold Futures and options, and wipe-out losses in other assets forced even true believers to quit their positions.

Gold Prices have the potential to recover, says a UBS analyst to Bloomberg TV. We don't doubt he's right. We just doubt gold's immediate potential given the overwhelming bullishness of every tomfool able to voice his opinion in public.

"Last time we talked, last September or October, you asked what I thought, and I was bullish at $1800," said one MBA with the certainty of a 12-year old to Business Insider a week ago. "Now it's $1660, and I'm still bullish. I'm more bullish than ever."

Good grief! Just think how bullish he must be now gold has sunk another $120. "When all the experts and forecasts agree, something else is going to happen," saysDavid Rosenberg, previously chief economist at Merrill Lynch, now chief economist and investment strategist at Gluskin Sheff and – ummm – an expert by any measure. But what happens when all the fools agree with the experts? It most likely ain't pretty.

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Reuters

Gold recovered from its lowest since late December on Wednesday, edging back into positive territory as U.S. stocks opened higher and after speculation Germany and France will act to keep Greece in the euro zone lifted the euro into the black.

Spot gold was up 0.3 percent at $1,549.04 an ounce at 1403 GMT, off a low of $1,527.00. The metal was earlier sucked into a broad-based financial market sell-off on the back of alarm over political turmoil inGreece.

Despite its recovery, it remains vulnerable to a further drop after its longest stretch of losses in nearly five months.

Gold fell along with other more industrial commodities such as copper and crude oil, under pressure from an early rise of the dollar, which put silver on track for its longest stretch of consecutive daily losses in nearly four years.

Fears a Greek exit from the euro zone would worsen the European debt crisis gripped European markets on Wednesday, sending shares and other riskier assets lower as investors shifted funds into safe havens like the U.S. dollar.

"Negative market sentiment seems well entrenched and we may see further downside in the price," BNP Paribas analyst Anne-Laure Tremblay said. "In particular, we could see further cross-asset liquidation if the probability of a Greek default increases in the next weeks."

Gold tends to trade inversely to the dollar, so that strength in the U.S. unit encourages non-U.S. investors to sell gold in exchange for greater profits in their own currencies.

The euro recovered after touching four-month lows versus the dollar, while European equities struggled off their lowest level for the year. Gains were muted, however. <MKTS/GLOB>

"It's difficult to see a turnaround just yet. There will be one, but I don't think this is the time, just when we are in the eye of the storm," Societe Generale analyst Robin Bhar said.

"Clearly, with people staring into the abyss, it could (fall) $50 or even $100 lower as it washes out. That is the unpredictability of it all and as equities fall, as the Greeks take money out of the banks and the banking sector collapses, I suppose you'd have to be wary of further price falls just to cover for losses in other markets," he said.

U.S. gold futures for June delivery were down $8.40 an ounce at $1,548.70.

BIG BULLS HOLD

In a small positive for gold, billionaire fund manager John Paulson held on to his stake in the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, in the first quarter of 2012, a regulatory filing showed on Tuesday.

The prospect of improvement in physical demand for gold from the Indian jewelry sector took a knock on Wednesday with the drop in the rupee to a record low against the dollar, driven by the widespread risk aversion.

Buying in India, the world's largest bullion consumer, has emerged with the decline in the dollar-denominated gold price to 4-1/2 month lows this week, but local dealers have said the weakness in the rupee could curb this.

"Definitely physical buying has gone up, although demand is not overwhelming," said a dealer in Singapore.

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Without even waiting a decent interval for mourning, JPMorgan Chase Chairman Jamie Dimon launched his defense campaign over the disclosure that he presided over a $2-billion trading loss in derivatives within days of the disclosure itself, choosing the comforting confines of NBC's "Meet the Press" for the campaign kick-off.

Dimon’s theme was essentially as follows: "Hey, everybody makes mistakes -- sure, we lost $2 billion, but we've still got billions more, and we'll figure out this one ourselves without the need for any further regulations, thank you."

His argument is plainly designed to distract from the right way to think about JPM's fiasco, which is that it's exactly the sort of thing that regulations should forbid banks from doing, lest they destroy the financial system -- again.

Dimon certainly showed supreme skill in choosing his venue. In "Meet the Press" host David Gregory he had a questioner who is expert in the honored television tradition of taking interviewees at their own level of self-esteem. Also someone who is so clueless about how banks and investment markets work that he hasn’t got the slightest idea of what questions to ask, much less how to follow up on an answer.

Here, for example, is how Dimon answered Gregory's question, "How did this happen?"

"First of all, there was one warning signal -- if you look back from today, there were other red flags. That particular red flag -- you know, we made a mistake, we got very defensive and people started justifying everything we did. You know, the benefit in life is to say, 'Maybe you made a mistake, let’s dig deep.' And the mistake had been brewing for a while, so it wasn't just any one thing." (The words are verbatim; punctuation is added.)

If you didn’t know anything about what happened at JPMorgan Chase before, now you know less.

For most of the interview Dimon allowed a pained smile to play on his lips, like someone who is suffering a mild case of indigestion but is confident that the Tagamet will soon take care of the discomfort. Dimon could pose as having been taken to the woodshed by the stern questioning of David Gregory. But this more resembled being taken to the woodshed for a cool, companionable drink.

Gregory didn't press Dimon to explain how the blown-up trade fits in with the ongoing debate over the Volcker Rule, a federal proposal designed to forbid banks from making risky trades for their own books. Here's the answer to that unasked question: It illustrates how Wall Street's campaign to eviscerate the rule will allow exactly this sort of trade to happen.

There's not that much mystery about the actual trade. Leaving aside the sophistication of the transactions themselves, JPMorgan's trader, a London-based derivatives expert whose portfolio was so outsized he became known in the markets as the London Whale, essentially bet that corporate debt was becoming less risky as corporations were getting stronger -- in trading parlance, he was long corporate debt. But he did so in a way that even a tiny hiccup in the index he was trading could be exploited by rival traders. And that’s what happened.

Dimon continues to explain this trade away as a "hedge." It may not have been anything of the kind. First of all, a hedge reduces risk: If one investment might lose a lot of money if markets move in one direction, you create a hedge that will make money under those circumstances so your losses are limited.

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Mail Online

Tens of billions of pounds were wiped off shares yesterday as Angela Merkel conceded for the first time that Greece could be forced to quit the euro.

The German chancellor suggested that European support for Greece would ‘end’ unless Athens held to the punishing bail-out terms agreed with Brussels and Berlin.

Her warning came amid mounting speculation that Greece could be forced out of the single currency within weeks – plunging both Athens and the single currency into crisis.

Observers have dubbed the possible departure as the ‘Grexit’ and one Greek minister last night warned the crisis could result in ‘civil war’, with Kalashnikov-toting gangs roaming Athens.

Greek newspaper Imerisia reported that the government has just £1.2billion left in its coffers – enough to continue for only a few days.

Last night there were also rumours of an unofficial ‘grey market’ in the drachma – the old Greek currency – springing up in anticipation of the exit.

Mrs Merkel, who will hold talks on the crisis with new French president Francois Hollande today, said Greece would ‘always’ be a member of the EU.

But she left open the question of Greece’s membership of the single currency, saying only that it would be ‘better’ if it remained within the ailing single currency.

Her comments came as the mounting political turmoil in Greece sent shockwaves through world stock markets. Mr Hollande will fly to Berlin today for talks just hours after being sworn in.

In London, the FTSE-100 index was down by 110 points to its lowest level this year, wiping almost £30billion off the value of Britain’s top companies. 

Bank shares took a hammering, with Barclays, Lloyds and Royal Bank of Scotland all down by around 5 per cent.

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There was a strong reaction on Tuesday to the elevated debt crisis in Europe, with commodities and equities being indiscriminately sold. Gold fell 3 percent this week, losing its safe haven status as the dollar grew stronger and the 10-year government note headed lower.

The markets generally overreact to negative news, however, investors should keep in mind gold’s normal monthly historical volatility. Throughout the past 20 years of monthly returns, the precious metal generally increased only 0.5 percent in May, and has historically declined in June and July.

Facts don’t thwart the short-term pain, yet as contrarian investor Baron Rothschild said, “the time to buy is when there’s blood in the streets.” Here are five reasons we believe today’s sell-off sets up a buying opportunity for gold:

1.    It is precisely the debt strangling the eurozone which will drive gold demand over the longer term. The side effect to the abundance of printing by central banks in the U.S., Europe, Japan and England is bloated balance sheets amounting to nearly $8 trillion. This is double the amount that it was only three and a half years ago.

2.    Several developed markets have negative real interest rates and these rates are anticipated to remain negative for years to come. Historically, when the inflationary rate is greater than the current short-term interest rate, gold prices rose.

3.    Emerging market central banks continued their gold buying spree in March. UBS Investment Research says that Mexico bought 16.8 tons, Russia bought 15.6 tons and Turkey added 11.5 tons. Additional small purchases were made by Tajikistan, Kazakhstan and Belarus. We wrote a few months ago that central banks have begun accumulating gold reserves since the Federal Reserve cut interest rates in 2007, and HSBC Global Research expects this buying trend to continue for another five years.

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Reuters

Gold rose on Thursday as bargain hunters waded into the market after prices fell sharply this week on worries about a worsening European debt crisis.

Gold followed U.S. equities higher as stress in Spanish debt markets eased slightly, and after Greece secured funds to repay its bondholders. Still, after three days of losses, bullion remained more than 3 percent lower this week.

Fading hopes for more U.S. monetary easing after a strong run of U.S. economic data has prompted investors to unwind bullish bets in gold. Thursday's data showed U.S. jobless claims edged down last week, offering a glimmer of hope after April's weak employment growth.

"Gold has behaved closer to risky assets rather than differentiating itself as a safe haven asset and has been winded by the possibility of further quantitative easing being scaled back," said Suki Cooper, precious metals analyst at Barclays Capital.

Weak physical demand from key gold consumers India and China also failed to boost prices, said Cooper, who also lowered her 2012 gold and platinum forecasts.

Asian bullion buying has tended to rebound last year following sharp price pullbacks.

Spot gold was up 0.3 percent at $1,595.10 an ounce by 12:42 p.m. (1642 GMT), rebounding from a four-month low on Wednesday.

U.S. gold futures for June delivery rose $1.20 an ounce to $1,595.40.

While investors bought gold as a safe haven from risk during the debt crisis last year, it is now trading more in line as a commodity which moves in the opposite direction to the U.S. dollar.

Ross Norman, chief executive of bullion broker Sharps Pixley, said gold's collapse this week was not surprising because bullion currently tended to trade inversely to the dollar, which overwhelmed the metal's safe-haven bid in times of extreme market stress.

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Gold futures edged higher Thursday, with some support from a round of U.S. economic data, a reprieve in concerns over Europe’s banking, and a weaker dollar, but with lack of investor interest keeping gains subdued.

Gold for June delivery advanced $1.30, or 0.1%, to end at $1,595.50 an ounce on the Comex division of the New York Mercantile Exchange.

“Gold is really lacking a theme in the marketplace,” said Adam Klopfenstein, an analyst with Archer Financial in Chicago. It does not move higher with equities, and it has been unable to catch flight-to-safety bids, which are going to the U.S. dollar and U.S. bonds, he said.

“Gold is really stuck,” and things are unlikely to change in the short term unless a steep, sustained fall for equity markets, he added.

Earlier Thursday, traders keyed off U.S. government data that showed initial jobless claims stayed relatively flat last week as import prices dipped in April and the U.S. trade deficit surged in March.

The dollar slipped Thursday, helping gold to stabilize after closing below $1,600 an ounce for the first time this year in the previous session.

Dollar-denominated commodities — particularly gold, which is seen as an alternate to paper currencies — often take a knock as the dollar rises.

On Thursday, European stocks and the euro rose after Spain moved to nationalize struggling real-estate lender Bankia and European leaders agreed to grant the next aid payment to Greece.

U.S. stocks traded modestly higher as well, with oil futures holding on to tenuous gains.

Despite its recent downturn, gold is not losing its luster “as the currency of last resort,” analysts at Goldman Sachs said in a report released Thursday.

“Improved confidence” in the dollar in recent months has made the U.S. currency the flight-to-safety asset at the moment, they said.

“However, we believe it is too early for the U.S. dollar to reclaim this status, as the original U.S. dollar concerns have not disappeared,” the analysts added. They left their 6-month forecast for gold prices unchanged at $1,840 an ounce.

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