Gold rose for a sixth day on Monday in its longest stretch of gains since March, driven by investor concerns over the potential spread of the eurozone debt crisis. The euro fell by more than 1 percent against the dollar, which hit two-week highs against a basket of currencies, as European Union officials held an emergency meeting to discuss whether the troubles that have plagued Greece, Portugal and Ireland could spread to Italy.
That followed Friday's US non-farm payrolls data, which showed job creation had virtually ground to a halt, dampening hopes that the world's largest economy would bounce back from its slowdown in the first half of this year and helping gold stage a 3.9 percent weekly rise in its best week since November 2009. Spot gold rose to a 2-1/2-week high of $1,556.59 before trading at $1,554.50 an ounce, up 0.7 percent by 1407 GMT. US gold August futures were up 0.9 percent at $1,555.50 an ounce.
"Given that we're in a seasonally weak period for physical demand, the downside is not as well supported as it could be. In turn given the period we're in, prices have held up really well on the back of the macro uncertainty over the European sovereign debt, as well as the dollar," said Suki Cooper, an analyst at Barclays Capital.
"So it's being pulled in two directions. Had the sovereign debt issues escalated during a seasonally strong period such as in April, there would have been a larger price pull towards the upside on the back of safe-haven buying and physical demand support." Consumers tend to retreat from the gold market in the northern hemisphere summer months.
Gold was just over 1 percent below early May's record high at $1,575.79 an ounce, but the price of bullion hit record highs in both euros and sterling on Monday. Euro-denominated gold hit record highs above 1,091 euros ($1,583) an ounce, while sterling-priced gold rose for a sixth day to a record 977.65 pounds ($1,571)an ounce.
"As this European crisis develops further, you would expect to see, and we are already seeing, people coming into gold on the physical side, not necessarily through ETFs but through other avenues, and you will see some defensive positioning from investors on the institutional side," Tom Kendall, analyst at Credit Suisse said. European Council President Herman Van Rompuy called an emergency meeting on Monday at which EU finance officials would discuss a range of options for Greece's debt mountain, galvanised by the growing threat of contagion to Italy, the eurozone's third-largest economy.
"If we start to see more pressure on Italy, such as talk of debt default, gold will look to test the previous high," said Darren Heathcote, head of trading at Investec Australia. Last week, holdings of gold in exchange-traded products (ETFs) rose for a fourth consecutive week, reflecting a pick-up in investor demand for the metal over the last month.
So far this year, however, gold ETF holdings have barely changed, although they have risen in three of the last four months. Ongoing worries about eurozone nations' sovereign debt and uncertainties around the debt ceiling talks at the US Congress also helped boost gold's safe-haven appeal.
On the physical market, buyers have moved to the sidelines after prices advanced nearly $60 in the previous week while scrap sales trickled in, dealers said. Spot silver fell was flat at $36.64 an ounce but off Friday's one-month high of $36.82. Platinum and palladium were both lower on the day. Platinum was down 0.3 percent, down for a second day, at $1,728.49 an ounce, while palladium fell 0.5 percent to $768.22.