Singapore: Gold climbed towards a five-month high on Monday as an electoral win by Greece`s anti-austerity party sparked fears of renewed instability in Europe, triggering safe-haven demand for bullion.
Greek leftist leader Alexis Tsipras, whose Syriza party swept to victory in a snap election on Sunday, was set to become prime minister of the first euro zone government openly opposed to bailout conditions imposed by the European Union and International Monetary Fund during the economic crisis.
European leaders have said Greece must respect the terms of its 240 billion euro bailout deal, but Tsipras campaigned on a promise to renegotiate the country`s huge debt, raising the possibility of a major conflict with euro zone partners.
The euro hit an 11-year low on Monday after the election results, and U.S. stock futures also fell.
"People are very uncertain about the markets and are wondering whether Greece will break out of the euro zone," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong, adding this was helping gold prices.
Spot gold was steady at $1,294.40 an ounce by 0322 GMT, after rising as much as 0.4 percent earlier in the session. It held close to a five-month high of $1,306.20 reached last week.
The yellow metal has had a good start to the year, gaining about 9 percent so far this month, largely due to safe-haven demand sparked by falling oil prices and European uncertainties.
The improvement in sentiment has been seen in investor positioning. Speculators raised their bullish bets in gold futures and options for the fourth straight week in the week ending Jan. 20, while holdings in SPDR Gold Trust, the top gold-backed exchange-traded fund, have also increased.
NEW GOLD CONTRACT
CME Group`s Asian gold contract began trading in Hong Kong on Monday, a new entrant in the regional race to provide a price benchmark.
The 1 kg physically settled contract was trading at a premium of $2-$3 an ounce over the global benchmark.
The launch of the CME contract within six months of new contracts in Singapore and China underscores a desire in top consuming region Asia to have price benchmarks that reflect regional market dynamics, although liquidity has been a problem.
"There have been lots of recent contracts in Asia, vying for liquidity. For CME, the delivery point is in Hong Kong, so that should make it an interesting one," said a precious metals trader in Hong Kong, which is the main conduit for gold into top consumer China.