Gold Price Rallies; Euro Rises

NEW YORK (TheStreet ) -- Gold prices were rallying Friday as Greece awaited financial aid from the EU and IMF and as the euro rebounded.

Gold for June delivery was up $12.40 to $1,155.30 an ounce at the Comex division of the New York Mercantile Exchange. The gold price Friday has traded as high as $1,157.90 and as low as $1,135.20. The U.S. dollar index was sliding 0.18% to $81.42 while the euro was rising 0.65% against the dollar. The spot gold price today was up over $13, according to Kitco's gold index.

Gold Prices Wait For Breakout

Gold prices reversed earlier losses as Greece officially asks for financial aid from the IMF and European Union. Details are still being worked out but in the next week Greece should have access to 40 billion euros at 5% interest, which is considerably lower than the 8.7% yield the country is currently paying on its 10-year bonds.

The euro had come under significant pressure as Greece struggled to come up with the money to pay back its May debt and interest payments. The recent downgrade of Greek debt by Moody's and reports that both Greece and Ireland had larger-than-expected 2009 budget deficits dragged on the euro, boosted the dollar and weighed on gold. Prices are now targeting the $1,160 an ounce area as gold gets a relief rally as the markets digest a Greece resolution.

"With Greece officially asking for assistance from the International Monetary Fund and the European Union, global currencies will likely remain volatile over the near-term, impacting metal and mineral prices," says Anthony Rizzuto, Jr., managing director of Dahlman Rose & Co. in his daily metals report. "We continue to believe that underlying demand for raw materials will trend higher as the global economy gains traction."

Many analysts expect the gold price to stay in a tight range as the metal trades as both a risk and safe haven asset. Those investors looking to trade gold might sell the metal and buy the U.S. dollar if the euro resumes its decline. On the other hand, investors concerned about the health of paper currency like the euro might buy physical gold as an alternative investment as a long term hedge. This tug of war is tempering gold's upside but providing support around $1,120 an ounce. A surge in U.S. new-home sales Friday helped boost investor risk appetite for equities and gold.