Gold gained for a second day in New York as a price drop in the past two weeks spurred physical buying in Asia and on concerns that Europe’s sovereign-debt crisis may linger.

Investors said the euro zone’s woes are likely to persist, even after finance ministers pledged to strengthen a safety net for debt-strapped countries. Gold futures have dropped 3.5 percent this year.

Prices are “starting to look attractive to Asian buyers,” Andrey Kryuchenkov, an analyst at VTB Capital in London, said in an e-mailed report today. While successful sovereign debt auctions in Europe removed some support from prices last week, “economic uncertainty in the monetary union remains,” he added.

Gold for February delivery rose $10.80, or 0.8 percent, to $1,371.90 an ounce on the Comex at 8:19 a.m. in New York. Bullion for immediate delivery gained $9.58, or 0.7 percent, to $1,372.22 an ounce.

“Around this level, we still see quite good physical demand,” Bruce Ikemizu, head of commodity trading at Standard Bank Plc in Tokyo, said today by phone. “I’m rather pessimistic. The problems won’t be resolved overnight. This European financial problem will be a long-term bullish factor for gold and precious metals.”

Bullion rose to $1,368.75 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from yesterday’s afternoon fixing of $1,360.50.

Deadline Looms

The euro gained as much as 1 percent against the dollar today, after falling 0.7 percent yesterday as finance chiefs from the 17-country euro region weighed how to get the 750 billion-euro ($1 trillion) rescue fund up to its full potential, examined ways to give it more flexibility and didn’t rule out boosting its size.

The Brussels meetings conclude today with all 27 European Union ministers, and a summit of EU leaders in late March looms as the deadline to outline a package of measures as concerns persist that Greece and Ireland, recipients of 178 billion euros in European and International Monetary Fund loans last year, will struggle to revive their economies.

Portugal raised 599 million euros from a sale of 10-year bonds on Jan. 12, and investors bid for 2.1 times the 3 billion euros of Spanish five-year bonds sold the following day.

The dollar decreased as much as 0.8 percent against a basket of six major currencies before a U.S. report tomorrow that economists said will show housing starts declined in December. Bullion usually moves inversely to the U.S. currency.

Morgan Stanley raised its gold forecast through 2015, the bank said in a report today. It expects gold to average $1,400 an ounce this year, 6 percent more than a previous forecast.

Platinum for April delivery rose 0.7 percent to $1,823.60 an ounce on the New York Mercantile Exchange. Palladium for March delivery gained 1.4 percent to $805.75 an ounce. Silver for March delivery increased 1.8 percent to $28.840 an ounce on the Comex.

To contact the reporter on this story: Sungwoo Park in Seoul at spark47@bloomberg.net.

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

Source: http://www.bloomberg.com/news/2011-01-18/gold-may-advance-as-europe-debt-concern-price-drop-spur-investor-demand.html