LONDON, Aug 12: Gold ran up to three-week highs in Europe on Monday, pulled up by falling stock markets and buoyed by euro strength against the greenback.

Spot gold was quoted at $315.80/316.30 a troy ounce up from $314.35/314.85 an ounce at the New York close on Friday.

The yellow metal hit a session best of $317.80 an ounce, its firmest level since July 23 and 16 per cent higher than this time last year.

Continued uncertainties in the financial markets are continuing to prove supportive, although European trading is quiet, which suggests that much of the activity at the moment is dealer driven, said the industry-backed World Gold Council.

Losses in Wall Street stocks and European equities and a weaker dollar performance against the euro both tied to expectations that the US Federal Reserve will not cut interest rates at its Tuesday meeting — provided the backdrop to gold’s gains, traders said.

The euro shot up to $0.9764/74, from $0.9694/99 late Friday, making dollar-priced gold more attractive to European investors in their own currency. The Australian dollar also surged, which benefits any Aussie gold miners looking to eliminate hedges.

Bullion was also supported by strong gains in leading gold mining shares and signs that demand in India, the world’s largest gold market, could be boosted with the onset of better monsoon rains.

The Johannesburg bourse’s gold mining index was up more than five per cent but gains were capped as the benchmark Philadelphia gold index opened broadly unchanged.

India’s Farm Ministry said the annual monsoon rains were likely to intensify after Wednesday in several areas that have been gripped by a drought.

India has been hit by the worst drought in 15 years, leading to large-scale damage to crops in key grain-bowl states of the country. But several regions have received good rains in the past four days and weather officials have said more rains are expected in the next two days.

According to the meteorological department, in the coming weeks, monsoon activity is expected to intensify, Hemendra Kumar, special secretary in the farm ministry, told reporters.

Speculation that leading miners were also buyers in the market to reduce their hedges or exposure to fixed prices was also supportive, traders said.—Reuters