Gold prices pass milestone mark as euro climbs

The price of gold drove beyond the milestone mark of $1,600 per troy ounce on Wednesday as the metal tracked the upward drive of the common currency of the European Union, according to Reuters.

The 17-nation currency benefited from remarks issued by policy maker Ewald Nowotny with the European Central Bank, who endorsed licensing the rescue fund for banking purposes. The embattled monetary unit climbed from lows against the world's reserve currency while stock market prices pushed higher.

Bestowing the European Stability Mechanism with a banking license would enable the fund to have access to less expensive funding from the ECB. The commentary comes as speculation grows ever louder about debt-hobbled Spain needing a full bailout, and investors, analysts and other observers are concerned about the ESM's capacity to handle the beleaguered nation's needs.

"Four to six weeks will take us into an interesting time for the gold market, which we think should be more constructive," analyst Tom Kendall with Credit Suisse told the news source. "Between now and then, physical demand is still pretty soft, positioning is disinterested across much of the investment community. Technically the price action is starting to look a bit more constructive ... but that could fade as quickly as it appears to have been building."

At 8:19 a.m. on Wednesday, gold prices increased 1.31 percent, a $20.70 lift to $1,601.50 per troy ounce.

Counter to 'political commentary'

Despite the gains to gold, Kendall warned that there are forces that work against Nowotny's remarks.

"We've had a modest uptick in sentiment this morning with these comments about the banking license for the ESM, but again that kind of market reaction to political commentary can be very easily undone by economic data, which has not been encouraging," the Credit Suisse analyst told the news source.

Among the weaker economic data on Wednesday was Germany’s business sentiment. As the euro zone’s largest economy, Germany plays a key role in the region’s attempts to work itself out of the clench of a nearly three-year-old debt scourge.

Development and growth figures in Britain for the second quarter were markedly worse than anticipated. And, shifting west across the Atlantic, the U.S. is slated to release economic data about U.S. new home sales later on Wednesday.

Additional news from the U.S. financial sector also benefited bullion and the euro.

Dollar drop

The world's reserve currency dropped slightly after notching its highest value in 24 months against the euro on Wednesday, RTT News reports.

The U.S. dollar remained pinched against two other safe-haven currencies. The greenback was virtually even against the Swiss franc and hovered about its lowest value in two months against the Japanese yen.

Estimates for new home sales last month in the U.S. are projected to be slightly higher than totals from May, which were 369,000 after increasing 7.6 percent from April. The U.S. Department of Commerce was projected to release data indicating new homes sales of 370,000 for June.

Gold demand still strong

Bullion's bounce back on Wednesday comes as its demand as an alternative investment continues, according to Bloomberg.

Thus far this year, gold is up about 1.6 percent as it drives toward a 12th consecutive year of gains.

With a record price of $1,923.70 per troy ounce as established on September 7 of last year, gold presently is more than $300 lower than its all-time high.

Speculation continues mounting about whether the U.S. Federal Reserve will deploy additional monetary easing to spur the globe's largest economy. The institution is scheduled to convene later next month.