Gold rose on Monday, breaking ranks with sharply lower equities and crude oil markets on signs of a worsening euro zone debt crisis as Spain formally requested a financial rescue. The metal spiked higher after sticking to a range in early trading.
Investors sought refuge in gold as Germany dashed any hope that Europe would issue common euro zone bonds to underpin its single currency after Spain formally applied for bailout loans to capitalise its banks. Cyprus' request for a EU rescue also boosted bullion buying.
Gold's rally was particularly impressive on a day when Wall Street dropped nearly 2 percent and crude oil prices slid. Trading volume in the metal, however, was light due to jitters ahead of a European Union summit later this week. "It's obviously a flight to quality, and gold is trading like a currency instead of a commodity. Until gold breaks out of this trading range, I suspect volume is going to remain tepid," said James Dailey, portfolio manager of TEAM Financial Asset Management.
Spot gold was up 0.7 percent at $1,582.89 an ounce by 12:37 pm EDT (1637 GMT). Last week, the metal posted a 3.5 percent decline on deflation worries and a lack of aggressive Federal Reserve stimulus. US gold futures for August delivery gained $17 an ounce to $1,583.90.