Gold prices have surged today due to the combination of a weaker US dollar and the demand from bargain hunters. Traders began buying into the low prices after it fell below US1,49/oz at the beginning of the week. The gold prices have performed a sharp correction in the last few weeks, due to concerns that the bullion was overbought.

Gold’s appeal was that it be counted on as a safe asset. But this reputation took a hit recently when Greece passed the austerity measures. This secured a 8.7 billion euro payment which will help try to reduce the deficit.

Because of this news, gold hit a six week low at US$1,478/oz last week, but has since begun a recovery because of weakness in the US market. The American dollar fell against the euro as speculation circulated that the European Central Bank (ECB) will increase interest rates this week. This will make the euro more attractive and offer better returns than the US dollar.

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