Gold Firms After Ireland Bailout

Gold firmed in Europe on Monday as the euro recovered from early two-month lows against the dollar after the announcement of a rescue package for Ireland, though fears over the stability of the euro zone lingered.

Portugal is the next country that may struggle with its sovereign debt levels, investors fear, after both Greece and Ireland were forced to seek bailouts from the European Union earlier this year. This uncertainty is helping underpin gold.

"Ireland has caused a lot of volatility in the markets over the last few weeks," said Michael Widmer, an analyst at Bank of America-Merrill Lynch. "What happened over the weekend was not necessarily a bad thing."

"Some of the immediate concerns, particularly over Ireland, seem to have been tackled. That overall did help the euro, and did help the precious metals. There are still underlying issues, and because of that, it still looks relatively good for the coming weeks."

The euro rose 0.2 percent against the dollar early on Monday, recovering early losses, on cautious optimism over the 85 billion euro bailout deal for Ireland.

EU finance ministers on Sunday endorsed the bailout package to help Dublin cover bank debts and bridge a budget deficit, and outlined a permanent system to resolve the euro zone debt crisis.

But some concerns lingered over other euro zone economies, most notably Portugal and then Spain.

"Should rumors so vigorously denied by Portugal prove to be true or fears spill over to Spain, gold will remain well underpinned."

The cost of insuring Irish government debt against default fell on Monday, reflecting an easing in investor nervousness over the outlook for Dublin's finances. However, five-year credit default swaps on both Spain and Portugal were largely unchanged.

Physical gold demand emerged last week as prices slipped back toward $1,350 an ounce, especially in Asia.

This is a strong indicator that there's much residual physical demand in the system that will provide ample support on dips.

Precious metals are of course precious and men and women love them - Gold, Silver, Platinum, Palladium. Crude and Natural Gas keep the world moving. Base Metals - Aluminium, Copper, Lead, Nickel and Zinc are widely used in industry.

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