London 30/03/2012 - Gold was slightly higher still on Friday afternoon, reflecting a slightly stronger along euro after eurozone leaders consented to boost the size of their bailout fund to relieve the region's debt crisis.

Spot gold was last $2.75 higher at $1,663.30-1,663.80 per ounce, stepping back slightly from its intraday high of $1,670.05 and largely confined to a narrow range either side of $1,660. On the charts, resistance is pegged at $1,672 and $1,679.

The focus is on the eurozone, where finance ministers meeting in Copenhagen have agreed to combine the region’s the two rescue funds - the EFSF and the ESM - to 700 billion euros, with an additional 240 billion euros that can be used in emergency situations, through to mid-2013.

“A sense of greater commitment to the provision of funds to eurozone countries in need would indicate more solidarity within Europe, and in turn potentially be a much stronger firewall," UBS said.

The promise of extra liquidity has supported gold and the euro - the single currency was at 1.3331 against the US dollar, having hit an intraday high of 1.3377 this morning, its best in around a month.

But the steady creep of Spanish and Italian bond yields has kept traders' enthusiasm in check - the yield on Spanish 10-year bonds edged back below 5.4 percent late on Friday afternoon but remains close to its highest since January. 

Spain is the main source of concern in Europe. The day after a 24-hour strike by unionised workers in the country, its government unveiled today 27 billion euros in budget cuts, aimed at reducing its deficit to 5.3 percent of GDP from 8.5 percent last year.

Still, investors remain sceptical of its ability to sidestep a bailout such as that agreed with Greece, Ireland and Portugal in recent months and have largely remained on the sidelines of the gold market ahead of the outcome of the Ecofin meeting.

Gold demand remains sluggish in India, where the government's decision to double the import duty on the metal to four percent continues to reverberate. This comes after January's increase to 2.06 percent of gold's value from a previous flat rate of 30,900 rupees per net kilogram.

But physical demand is expected to pick up in April because of the Akshaya Tritiya festival - the second-most important festival for gold buying - at the end of the month.

Gold has slipped from $1,720 at the start of the month, providing an opportunity for some investors to accumulate metal. One example has been buying of physically backed ETFs, which have risen to a fresh record of 2,473 tonnes.

Among other precious metals, silver rose 12 cents to $32.36/32.42 per ounce and platinum gained $7.50 to $1,639.50/1,649.50 but palladium fell $2 to $643/658.


(Additional reporting by Tom Jennemann and Clara Denina, editing by Mark Shaw)

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