Gold up over 1 percent on hopes of more money stimulus

NEW YORK (Reuters) - Gold rose more than 1 percent on Wednesday, breaking ranks with equities, as renewed hopes of U.S. and European monetary stimulus amid signs of a stalling global economy boosted the metal's investment appeal.

Bullion, a traditional inflation hedge, rallied on speculation that the European Central Bank will create new money to fund operations for rescuing troubled countries in the region, traders said.

Spain and France jointly said stability in the euro zone needs the adoption of a single supervisory mechanism for the bloc's banks. Also, ECB policymaker Ewald Nowotny said he could see grounds for giving Europe's rescue fund a banking license.

Hopes for more European monetary easing gave fresh impetus to gold, which had been lifted late on Tuesday by expectations that the U.S. Federal Reserve was exploring new tools to boost growth.

"The gold market has been looking for any hints of any quantitative easing program. You are seeing this big bounce today off the fact that there could be something going on in euroland," said Jeffrey Sherman, commodities portfolio manager at DoubleLine Capital LP, which has $38 billion in assets.

Spot gold was up 1.4 percent at $1,601.84 an ounce by 11:38 a.m. EDT (1538 GMT), having hit a near three-week high at $1,606 earlier in the session.

U.S. gold futures for August delivery were up $25.30 an ounce at $1,601.50, with trading volume on track to be the strongest in over a month, preliminary Reuters data showed.

Gold has held in a $75 range so far in July, its narrowest monthly spread since April. Weak seasonal buying in top bullion consumers such as India and China, waning inflows into gold-backed exchange-traded funds and caution among investors have limited price gains.

U.S. equities measured by the S&P 500 <.spx> erased early gains after new U.S. single-family home sales dropped by the most in more than a year and revenues from bellwether company Apple Inc disappointed.

OUTFLOW FROM SILVER ETF

Silver rose 1.4 percent to $27.33 an ounce. Confidence in the metal remains shaky, however, analysts said, with investors wary of taking profits in the traditionally volatile asset.

The world's largest silver-backed exchange-traded fund, the iShares Silver Trust, posted an outflow of 69.36 metric tons (76.45 tons) on Tuesday.

Gold's rise also pushed its premium over platinum, which has suffered from the impact of slowing economic growth, above $200 an ounce for the first time since January. The platinum/gold ratio rose to a 7-1/2-month high at 1.15/1.

Platinum group metals, which are largely used as catalytic converters by the auto industry, underperformed gold.

Spot platinum rose 1.1 percent at $1,392.74 an ounce, while spot palladium gained 0.7 percent to $559.99 an ounce.

(Additional reporting by Jan Harvey in London; Editing by Dale Hudson)

Source: http://news.yahoo.com/gold-rises-ecb-comments-lift-euro-stocks-104854462--finance.html

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