Gold surges higher on Greek bailout worries

Forexpros - Gold futures surged higher Tuesday, on fears that the Greek bailout package will not be sufficient for the island nation to avoid default in the future.

On the Comex division of the New York Mercantile Exchange, gold futures for April delivery traded at USD1,757.45  a troy ounce during U.S. afternoon trade, surging 1.80%.      

It earlier hit a high of USD1759.35 a troy ounce and a low of USD1732.35 during the trading session

Futures were likely to find support at USD1,727.85 a troy ounce, the low from February 17 and technical resistance at USD1,759/35,  the sessions high.

There was neither floor trading nor a closing price on the Comex Monday because of the U.S. Presidents’ Day holiday. Tuesday’s trades will be booked with yesterday’s electronic transactions for settlement.

Euro zone finance ministers agreed the details of a new financial package for Greece, which will reduce the country’s debt to 120.5% of gross domestic product by 2020.

Private-sector creditors also agreed to take a write-down on their bonds of more than 53%, which is expected to cut Greece's debt by EUR107 billion.

However, investors remained worried amid concerns that a general election in Greece, which is expected to take place in April, may result in problems implementing the terms of the package.

Some analysts felt the deal was only a short-term fix that falls short of what Greece needs to prevent financial collapse.

A report on the sustainability of Greece’s debt by the Troika, which is composed of the European Union, European Central Bank and the International Monetary Fund, said that "additional debt relief" will be required in the future.

Gold has traded in a range between USD1,700 and USD1,760 since the beginning of February, closely tracking sentiment towards Greece’s bailout talks.

Meanwhile, the international tensions over Iran's nuclear program and the subsequent rise in oil prices to nine-month highs are also supporting gold prices.

Iran deployed warplanes and missiles Monday in an "exercise" to protect nuclear sites threatened by possible Israeli attacks, state-run media outlets reported.

There are fears that an escalation of hostilities between Israel and Iran could set off a conflict across the region and send oil prices skyrocketing.

Higher oil prices tend to benefit gold as it enhances its appeal as a hedge against oil-led inflation.

Elsewhere on the Comex, silver for March delivery rallied 3.35% to trade at USD34.33 a troy ounce, while copper for March delivery surged 3.55% to trade at USD3.84 a pound.