London 07/11/2011 - Gold started the week on a strong note, reaching a fresh six-week high in early European trade amid further signals that the European debt crisis is far from improving.
Spot gold rose $18.60 or one percent to a fresh six-week high of $1,773.40 per ounce at one stage in early trade. It was last seen at $1,766.70/1,767.20 per ounce, still up $11.90.
On the charts, the next resistance level is pegged at $1,772 and then $1,775, while support stands at $1,737.
"The situation in Europe looks set to remain very much in focus this week, and while intraday fluctuations are to be expected, the overriding market sentiment is likely to be risk-off," a trader said.
"Gold's outperformance of silver, platinum and palladium this morning might be a snapshot of things to come," he added.
The euro remained softer versus the US dollar at 1.3760, while European equities were weak and looked set to remain depressed after eurozone retail sales for September posted the sharpest drop since May, down 0.7 percent from a revised minus 0.3 percent in the previous month.
Elsewhere, the Sentix investor sentiment in the eurozone dropped by 2.7 points to minus 21.2 in November, the lowest level in more than two years, data showed on Monday.
In wider markets, the Greek parliament will nominate a leader for the new coalition government after current Prime Minister George Papandreou resigned during the weekend following an hectic week that saw the proposed referendum on the EU bailout scrapped amid strong international polemics.
"The yellow metal therefore looks relatively unimpressed by the apparent imminent end to the political crisis in Greece," broker Commerzbank said.
"This is because even if a default by Greece looks unlikely for the time being, the focus of market players is already turning to Italy as the next big worry," it added.
Uncertainty over the Italian political situation heightened on Monday amid rumours that Silvio Berlusconi may step down as Prime Minister. A parliamentary vote to discuss austerity measures is scheduled for Tuesday, while Italian yields approached the critical seven percent mark.
UK Barclays Capital downgraded some key Italian banks, adding to gloomy sentiment.
France is expected to disclose a budget deficit cut by twenty percent later today after it trimmed growth forecast for next year to one percent from a previous 1.75 percent last week.
Among other precious metals, silver fell marginally, down four cents to $34.10/34.15 per ounce.
Elsewhere, platinum dropped $7.50 to $1,625.20/1,635.20 per ounce and palladium also fell $4.90 to $648/653 per ounce.
The more industrial precious metals could be impacted by Chinese inflation numbers later this week.
(Editing by Perrine Faye)