Gold extends gains on EU debt hopes

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SINGAPORE, Oct 11 (Reuters): Spot gold prices edged higher Tuesday, building on a rally of more than 2 per cent in the previous session, as optimism about a resolution of the euro zone's debt crisis underpinned market sentiment. The pledge by Germany and France on Sunday spurred rallies in commodities and equities, and also helped US gold futures stage the biggest one-day rise in nearly two weeks. "As the news revived risk appetite, some money was being moved out of the money market to commodities, including gold," said Hou Xinqiang, an analyst at Jinrui Futures in China. "In addition, the outlook for stronger physical gold demand is likely to buoy sentiment in bullion." Premiums for gold bars in Hong Kong stood at around $3 an ounce to spot prices, their highest level since at least February, while the premium in Tokyo held at 50 cents, dealers said. "We see the bottom for gold prices at $1,600," said a dealer at a large Tokyo-based bullion house. "When gold prices approach that level, physical demand from emerging economies rises."