Gold rises in Europe

Gold prices rose back above $1,770 an ounce on Tuesday as the euro hit session highs versus the dollar, and following data that showed central banks added to their bullion holdings in July and August, led by South Korea and Paraguay. The metal has risen nearly 5 percent so far in September and is set for a fourth straight monthly gain on expectations the Federal Reserve will keep credit flowing through the US economy and interest rates low by buying government bonds.
The Fed's pledge to buy $40 billion in mortgage-backed securities each month as long as job creation remains sluggish should protect gold from severe sell-offs, analysts say. Spot gold was up 0.5 percent to $1,771.70 an ounce by 1347 GMT, recovering from an earlier low of $1,759.79. The metal hit a 6-1/2 month high at $1,787.20 an ounce last week, but has since struggled to build on those gains.
"The market has already come up 12 percent since mid-August, so that's a pretty good rate of return over six weeks or so," Credit Suisse analyst Tom Kendall said. "I think it's natural to expect some consolidation before it pushes up through $1,800." Data from the International Monetary Fund on Tuesday showed South Korea raised its holdings of gold by nearly 16 tonnes in July, along with Paraguay, which raised its reserves in July from a few thousand ounces to more than 8 tonnes, continuing the trend among central banks to hold more bullion. According to the IMF's international finance statistics report, South Korea added 15.988 tonnes of gold to bring its holdings to 70.44 tonnes in July, meaning it has doubled its bullion reserves in the space of a year after being one of the largest purchasers of gold in 2011.
Paraguay raised its holdings by 7.527 tonnes to 8.194 tonnes two months ago, while Venezuela cut its holdings by 3.733 tonnes to 362.053 tonnes in that month. So far this year, central banks have added a net 262.1 tonnes to their reserves, compared with 203.39 tonnes in the first eight months of 2011. Turkey has added the most to its holdings, having raised its reserves by 100.2 tonnes in the first eight months of the year, followed by Russia, which has added 53.75 tonnes.
Private investors have also added to their holdings of gold through exchange-traded funds backed by physical metal, which now hold a record 74.06 million ounces. In other precious metals, palladium was flat on the day at $640.72 an ounce. On Monday, the price fell by more than 4 percent, its largest one-day decline since early March, in what traders and analysts said was a bout of technical selling that gathered pace after the price broke through the 200-day moving average. Platinum edged up by 0.9 percent to $1,628.61 an ounce, while silver rose by 0.8 percent to $34.21.