Gold Prices Rise 1% to 6-Week High

(REUTERS) -- Gold rose 1 percent on Monday to a six-week high, boosted by technical buying and as the euro rallied ahead of the outcome of a euro zone meeting on Greek debt restructuring.

Gold option volatility also spiked ahead of an expiration later this week. The metal broke above $1,669 an ounce, a key resistance level on technical charts, and approached the $1,700 an ounce level for the first time in a month.

A slumping dollar boosted bullion and crude oil, as Germany and France pressed for a rapid deal between Greece and its private creditors to cut its soaring debt and avert default.

Gold is reaching another technical area. An above $1,675 close tonight could mean additional buying this week ahead of option expiration and as traders await the euro zone news, said George Gero, vice president of RBC Capital Markets.

Spot gold was up 1.2 percent at $1,677.06 an ounce by 12:43 p.m. EST (1743 GMT) . Its session high of $1,681.16 was the highest price since December 12.

U.S. gold futures for February delivery were up $13.40 an ounce at $1,677.40 in the COMEX division of NYMEX.

On charts, gold rose above technical resistance at its major downward trendline at $1,669 an ounce, said Rick Bensignor, chief market strategist at Merlin Securities.

Bensignor said staying above that resistance should bring in short covering and new buyers who believe the correction is over.

Gold's next resistance lies at its 100-day moving average at $1,688 an ounce, analysts said.

GOLD VOLATILITY UP

The CBOE Gold ETF Volatility Index .GVZ, often referred to as the Gold VIX and based on GLD options, rose to a one-week high of 21.

Volatility often increases ahead of an option expiry. COMEX February options are scheduled to expire on Thursday.

Gold has fallen only twice in the past 10 sessions and has risen 7 percent in January. But analysts warned that any more bad news on the euro zone that knocks the euro lower versus the dollar could also hit gold.

Gains in the prices of raw materials like crude oil and key industrial metals also lent support to gold. Brent crude rose by more than $1 a barrel and copper gained 1.5 percent.

On the physical side of the market, Indian gold demand firmed as the stronger rupee increased local buyers' purchasing power for the dollar-priced metal.

Volumes were light elsewhere as markets closed in China - one of the world's top gold consumers and in other key Asian markets for the Lunar New Year break.

Silver was up 0.5 percent at $32.30 an ounce, tracking gains in gold. Spot platinum was up 1.6 percent at $1,554.99 an ounce, while spot palladium was up 1.7 percent at $684.72 an ounce.

Prices at 12:43 p.m. EST.