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Gold Prices Settle Higher on Greek Debt Deal (Update 3)

NEW YORK ( TheStreet ) -- Gold prices were volatile Thursday but were able to eke out a gain after Greece secured a debt deal and as the Bank of England pumped more money into the system.

Gold for April delivery added $9.90 at $1,741.20 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,755.50 and as low as $1,728.30 an ounce while the spot price was down $5, according to Kitco's gold index.

Silver prices ended 21 cents higher at $33.91 an ounce while the U.S. dollar index was 0.15% lower at $78.57.

Gold prices had a volatile day Thursday after news broke that Greece has secured a debt deal, which would implement austerity measures and secure its second bailout of 130 billion euros. Gold prices were volatile on the news initially popping, then giving back gains then moving firmly higher but then closing off their highs. Once gold crossed the $1,750 its also possible that buy stops were triggered where traders buy gold at this predetermined price. This buying no doubt duked it out with profit takers who were looking to lock in gains.

The question still remains -- is this enough to save Greece or will the country have to leave the euro? "Early enthusiasm waned as more realities set in," says George Gero, senior vice president at RBC Capital Markets, "much of the rally was short covering as buy stops were elected all the way up to $1,750 area. Greece still has to come to a bond swap deal with private bondholders and the European Central Bank to help its debt load.

On the one hand, if Greece is forced to leave the euro the currency could rally, "it's like trimming the cancer off," says Phil Streible, senior commodities broker at RJO Futures, and would most likely support gold. Although if risk appetite returns in full force, gold might be forgotten as a safe haven asset. If Greece leaves the euro and all hell breaks loose and the euro plummets, gold could sink along with it at least in the short term. Mario Draghi, head of the ECB, already said in a press conference today that the economic outlook remains "uncertain" and "downside risks remain."

Also supporting gold was the news that the Bank of England added to its quantitative easing program by 50 billion pounds bringing the total to 325 billion pounds. The central bank left interested rates unchanged at 0.5% while the European Central Bank left its rate at 1%. Gold prices rose slowly after the news, but many experts had been expecting a bigger pop in the price with central banks unabashedly pumping money into the system.

"The reality is is that it's all about the euro," says Streible, "with the fragile state all of Europe is in right now, any sign of quantitative easing, or QE, is probably too little at this point ... more types of stimulus plans means more spending cuts are soon to follow." More stimulus can trigger a rush into gold as a hard asset, an alternative to the paper currency being devalued, but austerity measures bring in the deflation worry, where gold tends to selloff initially.
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