Gold prices rallied 3% along with the euro after the European Union summit showed confidence by deciding to support banks and slash burrowing costs for Italy and Spain. Euro Zone leaders struck a deal to take emergency action to cut down Italy and Spain’s spiraling borrowing costs. They also agreed to form a single supervisory body for all EU banks by the end of 2012. The safe-haven United States and Germany’s bunds fall sharply along with Spanish and Italian bond yields after the European Summit measures.

However, gold prices set for the worst quarterly drop in 8 years. Gold has fallen 5.87% since the end of March, which was the worst quarter since June 2004. In this scenario, dollar rallied 4.7%, which benefited massively due to the yellow metal surge but euro profited by 1.9% in euro versus dollar. On the other hand, Federal Reserve’s monetary easing hopes faded.

Gold prices were mounting $1,920.30 an ounce last September but in the first half of 2012, it somehow averaged $1650 an ounce. The momentum in the international gold prices is completely lost and gold market has to emphasis on itself to trigger spark in the prices. Analysts believe that the current slump in gold price is temporary and there would probably rise in the prices in the next half of the year.

"After 11 years it is only natural that gold stops and pauses for breath before taking the next step higher," Saxo Bank vice president Ole Hansen said. "The worry is obviously that momentum has been completely lost and leveraged players (such a hedge funds) have left the building. They will come back, but the market needs to reassert itself before that happens, as they are more followers than instigators of trends."

"The news has been positive for the euro and positive for confidence in general, which means that equities and commodities, including gold for the time being, have all received a shot in the arm," Simon Weeks, head of precious metals at the Bank of Nova Scotia, said.

Standard & Poor’s GSCI Index of commodities plunged the most in a single week since German unemployment ascended in June and sharp fall in U.S. job rate in 2012. Spot gold price trend shows encouraging signs, as it was moving in a positive direction. Spot silver climbed 0.3 percent to $26.4412 an ounce. Cash platinum was slightly climbed at $1,389.25 an ounce. Palladium climbed 0.3 percent to $567.25 an ounce.

Physical gold buying in India, which is a major gold consumer in the world, has slightly increased. The demand is not increasing at a rapid rate as expected by the analysts, because of the record rupee weakness against the dollar. Gold traders and dealers are expecting massive rise in the gold prices, as monsoon has arrived, which is an important season of productivity and profits in India.