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Oil jumped on Thursday by the biggest percentage in two months, hitting a three-week high as U.S. data on jobless claims and retail sales came in stronger than expected, raising hopes that economic recovery was gaining traction.

Independent data showing U.S. private hiring surged in June set the stage for a possible upside surprise in Friday's U.S. non-farm payrolls report, traders said.

After weekly U.S. data showed a surprisingly small decline in oil stocks, ICE Brent crude extended its rally while the U.S. benchmark faltered.

The Brent/WTI spread blew out by $3 to top $20 a barrel, the widest since June 20, as production problems plagued North Sea oil supplies and as traders bet that European governments would release fewer barrels than expected under a global injection of emergency stocks that has failed to tame prices.

In London, ICE Brent crude futures for August delivery settled at $118.59 a barrel, gaining $4.97, or 4.4 percent, their biggest one-day gain since May 9. It hit a session high of $118.70, the highest intraday since June 15.

U.S. August crude lagged, rising by just $2.02, or 2.1 percent, to settle at $98.67, off its session high of $99.42 -- the highest intraday price since June 15.

Traders focused on the jobs-related data even after U.S. government data showed crude oil inventories fell by just 889,000 barrels last week. That decline was less than forecast and well below the 3.2 million barrel drawdown in an industry report on Tuesday.

"Prices are still up, with investors minding pundits' views that the economy will pick up in the second half," said Mark Waggoner, president of Excel Futures in Bend, Oregon.

ECONOMY DRIVES

U.S. private hiring surged in June, data from payrolls processor ADP showed while the Labor Department reported new claims for unemployment benefits fell more than projected last week.

Leading U.S. retailers reported better-than-expected sales for June, further boosting hopes for oil demand.

U.S. equities rallied on the economic data while the euro rose against the dollar, with investors now looking ahead to Friday's employment report to provide more evidence of a pick-up in growth. .N

Economists polled by Reuters prior to the ADP figures expected the report, due at 8:30 a.m. EDT on Friday, to show employers added 90,000 jobs in June.

The dollar dropped against the yen, and the euro tumbled on Friday after data showed U.S. nonfarm payrolls rose by only 18,000 in June, the weakest reading since September and well below economists' expectations.

The dollar fell as low as 80.71 yen on Reuters data following the news, compared with 81.45 yen earlier. It was last down 0.5 percent at 80.83 yen.

The euro briefly tumbled 1 percent to a session low of $1.4204 as the jobs data dented risk appetite. It was last at $1.4262, down 0.7 percent on the day.

European Council President Herman Van Rompuy has called an emergency meeting of top officials dealing with the euro zone debt crisis for Monday morning, reflecting concern that the crisis could spread to Italy, the region's third largest economy.

European Central Bank President Jean-Claude Trichet will attend the meeting along with Jean-Claude Juncker, chairman of the region's finance ministers, European Commission President Jose Manuel Barroso and Olli Rehn, the economic and monetary affairs commissioner, three official sources told Reuters.

Van Rompuy's spokesman Dirk De Backer said: "It's a coordination, not a crisis meeting." He added that Italy would not be on the agenda and declined to say what would be discussed.

However, two official sources told Reuters that the situation in Italy would be discussed. The talks were organized after a sharp sell-off in Italian assets on Friday, which has increased fears that Italy, with the highest sovereign debt ratio relative to its economy in the euro zone after Greece, could be next to suffer in the crisis. A second international bailout of Greece will also be discussed, the sources said.

The spread of the Italian 10-year government bond yield over benchmark German Bunds hit euro lifetime highs around 2.45 percentage points on Friday, raising the Italian yield to 5.28 percent, close to the 5.5-5.7 percent area which some bankers think could start putting heavy pressure on Italy's finances.

Shares in Italy's biggest bank, Unicredit Spa, fell 7.9 percent on Friday, partly because of worries about the results of stress tests of the health of European banks that will be released on July 15. The leading Italian stock index sank 3.5 percent.

The market pressure is due partly to Italy's high sovereign debt and sluggish economy, but also to concern that Prime Minister Silvio Berlusconi may be trying to undermine and even push out Finance Minister Giulio Tremonti, who has promoted deep spending cuts to control the budget deficit.

"We can't go on for many more days like Friday," a senior ECB official said. "We're very worried about Italy."

Monday's emergency meeting will precede a previously scheduled gathering of the euro zone's 17 finance ministers to discuss how to secure a contribution of private sector investors to the second bailout of Greece, as well as the results of the stress tests of 91 European banks.

GREECE

Greece is already receiving 110 billion euros ($157 billion) of international loans under a rescue scheme launched in May last year but this has failed to change market expectations that it will eventually default on its debt.

Senior euro zone officials worry that progress toward a second Greek bailout, which would also total around 110 billion euros, is not being made quickly enough and that the delay is poisoning investors' confidence in weak economies around the region.

"We need to move on this in the next couple of weeks. It's not a case of waiting until late August or early September as Germany is saying. That's too late and markets will make us pay for it," a top euro zone official told Reuters on Saturday.

German officials insist they too want to put together the second Greek bailout as quickly as possible, but the private sector's contribution is proving to be a major sticking point.

Germany, the Netherlands, Austria and Finland are determined that banks, insurers and other private holders of Greek government bonds should bear some of the costs of helping Athens. But more than two weeks of negotiations with bankers represented by the Institute of International Finance (IIF), a lobby group, have made next to no progress on agreeing a formula acceptable to all sides.

Initially talks focused on a complex French plan for private creditors to roll over up to 30 billion euros of Greek debt, buying new bonds as their existing ones matured. Around half of proceeds from Greek bonds maturing before the end of 2014 would be rolled over into very long-term debt while 20 percent would be put into a "guarantee fund" of AAA-rated securities.

But as that plan has floundered, Berlin has revived a proposal to swap Greek bonds for longer-dated debt that would extend maturities by seven years. Proposals to buy back Greek bonds and retire them have also been floated.

In a buy-back, the euro zone's bailout fund, the European Financial Stability Facility, might buy Greek bonds from the market, or the EFSF might lend Greece money to buy bonds. However, these schemes would require further changes to the EFSF's rules and would therefore have to go through national parliaments, an official source said.

World stocks hit one-week lows and the euro slid across the board on Monday as intensifying concerns that Italy could be the next victim of the euro zone debt crisis prompted an emergency meeting of top European officials.

Fresh signs of tension in Italy's government and problems for Economy Minister Giulio Tremonti -- trusted by financial markets to cut spending -- prompted a sell-off in the country's government bonds. Italy has the euro zone's highest sovereign debt ratio relative to its economy after Greece.

A weaker-than-expected U.S. jobs report on Friday and data showing China's import growth fell to its slowest pace in 20 months also encouraged investors to sell their risky assets.

"Investor sentiment is on the back foot this morning. Nobody knows where this is going to stop and when the next domino will fall," said Jeremy Batstone-Carr, strategist at Charles Stanley.

"Italy is in a different order of magnitude from Greece, Portugal and Ireland and takes the crisis to a whole new level."

The MSCI world equity index .MIWD00000PUS fell 0.7 percent to a one-week low.

European stocks markets/index?symbol=gb%21FTPP">.FTEU3 fell 0.7 percent while emerging stocks .MSCIEF lost 1 percent. U.S. stock futures fell almost 1 percent, pointing to a weaker open on Wall Street later.

The Euro STOXX 50 volatility index .V2TX rose 7.9 percent, its highest in nearly two weeks.

JP Morgan says Italian banks are vulnerable because of their high reliance on wholesale funding. Their loan-to-deposit ratio stands at 1.42 -- higher than that of Spanish banks and above the average of 0.9 for French and German banks.

Moreover, their government bond holdings stand at 6.33 percent of assets, higher than those of Spanish banks.

"The higher the market pressure on BTPs, the lower the appetite of Italian banks to sponsor their domestic government bond market for fear of raising their sensitivity to the sovereign even further," the bank said in a note to clients.

Bund futures rose 50 ticks. The Italian/German 10-year yield spread widened by 14 basis points to 258 bps, as BTP futures tumbled more than 100 ticks to 103.29.

Herman Van Rompuy, the president of the European Council, will meet European Central Bank President Jean-Claude Trichet and Jean-Claude Juncker, the chairman of the Eurogroup, ahead of a meeting of the 17 euro zone finance ministers later.

"Concerns over Italy show contagion risks in the euro zone are increasing. Investor confidence remains low and will limit demand for euro denominated assets," said Manuel Oliveri, currency analyst at UBS in Zurich.

The dollar .DXY rose 0.7 percent against a basket of major currencies. The euro extended earlier losses to lose 0.7 percent on the day to $1.4113.

A Financial Times report saying some EU leaders were considering allowing a selective default by Athens to put its debt on a more sustainable footing also dented the single currency, traders said.

Data last Friday showed U.S. jobs growth nearly halted in June, adding to concerns about the health of the world's biggest economy.

The dismal jobs report was also seen complicating efforts to avert a looming U.S. debt default. President Barack Obama and congressional leaders of both parties were in high-stakes talks to break the impasse over raising the debt ceiling.

Gold steadied on Monday, having risen for five days in a row, supported by investor concerns over the spread of the euro zone debt crisis, although gains were tempered by the dollar's strength.

The euro fell 1 percent against the dollar, which hit two-week highs against a basket of currencies .DXY, as European Union officials held an emergency meeting to discuss whether the troubles that have plagued Greece, Portugal and Ireland could spread to Italy.

Italian bonds and stocks tumbled, while perceived safe-haven instruments such as German Bunds and the Swiss franc gained, along with euro-denominated gold, which hit record highs above 1,091 euros ($1,583) an ounce.

Friday's U.S. non-farm payrolls data, which showed job creation had virtually ground to a halt, dampened hopes that the world's largest economy would bounce back from its slowdown in the first half of this year and helped gold stage a 3.9 percent weekly rise in its best week since November 2009.

Spot gold rose to a 2-1/2-week high of $1,547.56, before trading at $1,543.96 an ounce, unchanged on the day, at 1100 GMT. U.S. gold August futures were up 0.2 percent at $1,544.70 an ounce.

"There's some lingering reaction to the poor U.S. jobs data ... but this morning has mostly been about Europe and this emergency meeting called today to discuss Italy," said Credit Suisse analyst Tom Kendall.

"As this European crisis develops further, you would expect to see, and we are already seeing, people coming into gold on the physical side, not necessarily through ETFs but through other avenues, and you will see some defensive positioning from investors on the institutional side," he said.

Euro-priced gold rose to an all-time high of 1,095.02 euros an ounce earlier in the day.

President Barack Obama on Monday increased pressure on Republican lawmakers to make concessions for a deal to avoid an August 2 debt default and said both sides must "pull off the Band-aid" and make sacrifices.

"If not now, when?" Obama said as he prepared to meet top U.S. lawmakers at 2 p.m. EDT, searching for a way to break a budget impasse that is holding up a vote on raising the $14.3 trillion debt ceiling.

The Treasury Department has warned it will run out of money to cover the country's bills if Congress does not raise the debt limit by August 2.

Failure to act could push the United States back into recession, send shock waves through global markets and threaten the dollar's reserve status.

The lack of progress in debt talks was cited as a factor for a more than 1 percent decline in U.S. stocks on Monday.

"The closer we get to the deadline, the more problematic it becomes," said Walter Todd, who helps manage $950 million at Greenwood Capital in Greenwood, South Carolina.

Obama used the latest in a series of White House news conferences to urge lawmakers on both sides to stop putting off the inevitable and agree to tax increases and cuts in popular entitlement programs, trying to persuade Americans he is the grownup in a bitter summer battle over spending and taxes.

"What I've said to the leaders is, bring back to me some ideas that you think can get the necessary number of votes in the House and in the Senate. I'm happy to consider all options, all alternatives that they're looking at," Obama said.

Republicans are adamantly opposed to raising taxes while Obama's Democrats are equally determined to protect Social Security, Medicare and Medicaid, the sacred cow pension and healthcare programs for the poor and elderly.

The euro was beaten down further in Asia on Tuesday, plunging to a record low versus the Swiss franc and sinking to a four-month trough against the dollar on growing concerns that the euro zone's sovereign debt crisis was spreading.

The single currency fell as low as $1.3932 -- its lowest since March 17 -- after a slew of stop-loss orders were triggered below $1.3980. The euro fell broadly, dropping to an all-time low of 1.1660 Swiss franc.

The euro was on the defensive as an emergency meeting by European financial officials failed to offer fresh measures to tackle the region's debt problems, dealers said.

Market participants were especially concerned about the debt of countries such as Spain and Italy, which came under strong selling pressure the day before.

"The market has become particularly concerned due to the sell-off in Italian bonds. A steep widening of the spread between Italian and German bonds is making the market worried," said Osamu Takashima, chief forex strategist at Citibank in Tokyo.

"The market was to a certain extent expecting the problems in Greece to spread to Spain, but this drastic move in Italian bonds was very surprising."

The spread on the 10-year Italian bond yield over that of German bonds widened to above 300 basis points the previous day from about 180 bps at the start of the month.

The euro was trading at 1.1690 Swiss francs, down 0.3 percent from the day before.

Against the yen, the euro was down 0.6 percent at 111.86 after falling as far as 111.67 -- the lowest since March 18.

Against the dollar, the single currency dropped 0.5 percent to $1.3962.

Support is seen around $1.3905/10, a 50 percent retracement of the January-May rally as well as the 200-day moving average.

Weakness in the euro helped push the dollar up against a basket of major currencies. The dollar index .DXY climbed as high as 76.370 -- its highest since April 1.

"I feel that the euro zone debt situation particularly deteriorated after Portugal was downgraded to junk status last week. The market again started to focus on the debt problem as being a problem for the whole region," said Kimihiko Tomita, head of foreign exchange at State Street and Trust.

"The fact that the euro broke decisively below $1.4 is significant. The most recent selling appears to be a bit too rapid, but the market could test the euro further in the short term given current sentiment," Tomita said.

In a bid to stop financial contagion engulfing Italy and Spain, officials promised to provide cheaper loans, longer maturities and a more flexible rescue fund to help Greece and other EU debtors.

They declined to rule out the possibility of a selective default by Greece, a move officials said bolstered Germany's push to involve investors in easing Greece's debt despite the concerns of the European Central Bank.

European Union finance ministers meet later on Tuesday and are under the cosh to soothe market nerves ahead of Thursday's Italian bond auctions. Italy is aiming to raise 7.75 billion euros in the debt market, according to estimates from Barclays Capital.

The latest Republican plan to avert a looming U.S. default is a fierce statement of conservative principles that pushes the party's negotiating position farther to the right.

That's why it may be the first step on the road to compromise.

By giving Tea Party conservatives in the House of Representatives a chance to take their favored legislation as far as it will go, House Speaker John Boehner may buy himself some needed goodwill from a vocal segment of his party that has sometimes viewed his deal-making efforts with suspicion.

That could make it easier for Boehner to eventually pass legislation that could be acceptable to President Barack Obama and the Democratic-controlled Senate, clearing the way for an increase in the debt ceiling before August 2 when the federal government faces a default on its financial obligations.

Even as Boehner touted his party's latest plan at a news conference on Friday, he left open the possibility that the House may take up a compromise being shaped in the Senate that so far has failed to catch on with junior lawmakers.

"The cut, cap and balance plan that the House will vote on next week is a solid plan for moving forward. Let's get through that vote, and then we'll make decisions about what will come after," he said at a news conference.

The cut, cap and balance bill conditions a debt-limit increase on passage of a constitutional amendment that would require the federal government to balance its books each year.

Constitutional amendments require a two-thirds vote. That's not likely in the Democratic-controlled Senate, and may even be a stretch in the House.

Even if it were to pass Congress, the amendment would not take effect until at least 38 of the 50 state legislatures ratify it.

Economists say a balanced-budget requirement would tie the federal government's hands during a recession, when tax revenues plummet and welfare costs rise, by forcing it to slash spending or raise taxes.

"That would make a recession worse," said Dan Seiver, a professor of finance at San Diego State. "It's exactly the opposite of what intelligent fiscal policy should do."

SMART POLITICS

But it's smart politics. Polls show that the public, and especially Republican voters, favor a balanced-budget requirement by wide margins.

"This is a vote where ... the House Republican majority gets to align itself with the American public at large," said Kevin Madden, a Republican strategist and former Boehner spokesman.

Some Democrats have lined up behind a balanced-budget amendment, but few are expected to back the Republican version, which also limits spending to 18 percent of gross domestic product and requires a two-thirds vote for tax increases.

The House is expected to vote on the cut, cap and balance plan on Tuesday, but has not yet set a vote for the balanced-budget amendment.

The Senate could vote on several balanced-budget amendments next week, a Democratic aide said. All are expected to fail.

That would clear the way for a so-called "Plan B" introduced last week by Senate Republican Leader Mitch McConnell, which would essentially pin the onus for a debt-ceiling increase on Obama and his Democrats.

Senate Democratic Leader Harry Reid is currently working with McConnell to make the plan more palatable to his party.

Democrats want to include about $1.5 trillion in spending cuts, including military cuts, along with a payroll tax-cut extension to boost the economy and an agreement on funding levels for the coming two fiscal years to avoid further budget showdowns, aides said.

The plan would also include a special deficit-reduction committee, made up of equal numbers of Republicans and Democrats, that would examine more sensitive budget topics like taxes and benefits. The panel would be guaranteed a vote on its findings, due by the end of the year.

House Republicans and outside conservative groups have been cool or hostile to the plan so far. While McConnell hopes to win control of the Senate in the 2012 elections by embarrassing Democrats, House Republicans are focused on delivering the deep spending cuts they promised voters last fall.

They might warm to McConnell's plan if they are allowed input on the spending cuts, as a Democratic aide suggests.

The failure of cut, cap and balance, coupled with an increasingly frantic lobbying campaign by business allies, could soften their opposition as August 2 approaches.

A sharp drop in the markets could change minds as well.

"What may look like something less than optimal today, if we're unable to get to an agreement might look pretty good a couple of weeks from now," Boehner said at a news conference on Thursday. "I think it's an option that may be worthy at some point."

German Chancellor Angela Merkel called on Sunday for private investors to make a major contribution to bailing out Greece, as pressure rose for radical action to cut the country's debt burden.

Officials proposed a range of schemes for Europe's bailout fund, the European Financial Stability Facility, to finance a buy-back or a swap in which private owners of Greek government bonds -- banks, insurers and other investors -- would accept cuts in the face value of their holdings.

European Central Bank Executive Board member Lorenzo Bini Smaghi suggested the EFSF be allowed to provide funds for a buy-back of bonds from the market, where prices have in some cases fallen 50 percent from levels at which the debt was issued.

"This would allow the private sector to sell bonds at market prices, which are currently below nominal value. At the same time, the public sector could benefit monetarily," Bini Smaghi told Sunday's To Vima newspaper in an interview.

Wolfgang Franz, head of Germany's "wise men" economic advisers to the government, said the huge size of Greece's 340 billion euro ($480 billion) debt pile meant it was "inevitable and justified" for the private sector to accept losses.

"One possibility would be that the current EFSF euro rescue mechanism swaps -- at a significant discount -- Greek bonds into bonds it issues and guarantees," Franz was quoted as telling Focus magazine at the weekend.

Alarmed by the spread of market jitters over Greece to Italy and Spain, where bond yields have surged in the past 10 days, European governments are struggling to put together a second bailout of Greece that would supplement a 110 billion euro rescue launched in May last year.

Germany is insisting private investors be involved in the second bailout, and Merkel indicated on Sunday that if they did not voluntarily agree to a major contribution now, they might eventually be forced into a more costly solution to the crisis.

"The more we can involve private creditors now on a voluntary basis, the less likely it is that we will have to take next steps," Merkel told public broadcaster ARD without elaborating on what those steps might be.

Three weeks of talks between European officials and the private sector have failed to reach a deal on the second bailout of Greece, but the lobby group representing commercial banks said on Sunday that some progress had been made.

"Progress has been made and the discussions are continuing," the Institute of International Finance said in a brief statement. It said the talks were focusing on "several options related to Greece's financing needs and longer-term debt sustainability.

Last week, European Council President Herman Van Rompuy announced that euro zone leaders would hold a summit in Brussels on Thursday this week to discuss the rescue of Greece.

But Merkel, while describing the summit as "urgently necessary," said she would only attend if lower-ranking officials had already prepared a clear rescue plan. "I will only go there if there is a result," she said.

BUY-BACK

Other options on the table include an extension of the maturities of Greek bonds. But German weekly magazine Der Spiegel, citing finance ministry sources, reported at the weekend that a debt buy-back had become the option most likely to attract a consensus.

Greece could cut its public debt by 20 billion euros if it bought back its sovereign bonds at market prices as part of a rescue deal, the magazine said.

Legal and technical obstacles may lie in the way of any step to involve the private sector in helping Greece. Bini Smaghi acknowledged, for example, that current EFSF rules did not provide for it to buy bonds from the secondary market; changing the rules might require approval by national parliaments.

Another potential obstacle is the ECB, since the central bank's president Jean-Claude Trichet has opposed any measure that would cause credit rating agencies to declare Greece in default, even on a limited basis.

But in an interview to be published on Monday, Trichet held out the possibility that a default could be managed smoothly. He said the ECB would stop accepting defaulted bonds as collateral in its money market operations -- a blow to Greek banks which depend on the operations for funding -- but suggested governments might provide other collateral.

"The governments would then have to step in themselves to put things right...The governments would have to take care the Eurosystem is presented with collateral that it could accept," Trichet told the Financial Times Deutschland without elaborating.

A deal on a private sector contribution to Greece would probably not by itself come close to solving the problem; officials and private economists estimate the country's debt would have to be cut by about half, to 80 percent of gross domestic product, to make it manageable in the long-term.

As part of the second bailout, officials are also looking at other measures to help Greece including up to 60 billion euros of additional emergency loans from European governments and the International Monetary Fund; steps to recapitalise Greek and European banks; and ways to stimulate economic growth in Greece.

As a key shareholder in the IMF, the United States is important to continued IMF support of Greece. U.S. Secretary of State Hillary Clinton, visiting Athens on Sunday, voiced strong support for Greece's effort to overcome its crisis, saying it was taking the hard steps needed for future growth.

Gold prices rallied to record highs above $1,600 an ounce in Europe on Monday as investors spooked by the euro zone debt crisis and the threat of a U.S. default bought into the metal as a haven from risk.

Spot gold rose as high as $1,600.40 an ounce and was up 0.4 percent at $1,598.76 an ounce at 0845 GMT. Gold rose more than 3 percent for a second straight week to Friday, a feat it has not achieved since February 2009.

Data from U.S. futures regulator the Commodity Futures Trading Commission showed on Friday that managed money sharply raised bullish bets in U.S. gold futures and options in the week ended July 12 as bullion prices rallied.

"CFTC data shows a surge into gold, so despite the higher levels the professionals have returned to gold with a vengeance," said Saxo Bank analyst Ole Hansen.

"The stress test result was met with a lukewarm response with focus again switching back to Europe. When that happens gold is often allowed to perform despite the dollar strengthening at the same time."

Sovereign default fears are growing in both Europe and the United States. The United States is struggling with deficit reduction talks ahead of the White House's July 22 deadline on a deal to raise the $14.3 trillion debt ceiling.

Euro zone ministers will meanwhile meet on Thursday to discuss the financial stability of the euro area.

German Chancellor Angela Merkel called on Sunday for private investors to make a major contribution to bailing out Greece, as pressure rose for radical action to cut the country's debt burden.

On the foreign exchange markets, the euro slid 0.7 percent against the dollar. Sovereign debt worries led investors to shift funds into safe-haven currencies like the Swiss franc and cut exposure to riskier assets.

Gold rallied across a number of major currencies, also hitting record highs in euro, sterling, South African rand and Canadian dollar terms.

"Investors are increasingly looking to gold as a safe haven as the U.S. dollar, pound sterling and the euro continue to devalue against stronger currencies such as those of Canada, Australia, Norway and Switzerland," said Angelos Damaskos, chief executive of Sector Investment Managers.

"Sovereign debt problems in the developed world persist and continue to hamper economic growth. Quantitative easing is the easy solution but rising inflation creates a headache for central bankers."

STOCKS UNDER PRESSURE

Stock markets fell in Europe as bank stocks came under pressure after a capital stress test failed to dispel fears about the regional debt crisis, while Bund futures opened higher as uncertainty ahead of a euro zone meeting this week underpinned appetite for safe-haven assets.

U.S. 10-year Treasury notes fell in Asian trade on Monday, with intraday moves set to stay choppy in the near-term due to uncertainty about the fate of U.S. debt talks and worries over the euro zone's sovereign debt crisis.

U.S. gold futures for August delivery were up $9.50 an ounce at $1,599.60, having peaked at $1,601.20.

Other commodities appeared lackluster, meanwhile, with Brent crude oil easing 0.6 percent and U.S. crude futures 0.2 percent. Industrial metals like nickel and aluminum eased, while bellwether copper was little changed.

Growing worries of a possible sovereign debt default on either side of the Atlantic are also weighing on oil prices.

Other precious metals tracked gold higher, meanwhile, with silver rising above $40 an ounce for the first time since early May. The grey metal rallied to a record $49.51 an ounce in April before correcting sharply.

It has rallied more than 15 percent in the last two weeks, however, as gold prices have risen.

"Toward the end of the summer, an expected pick-up in interest in silver could take the gold/silver ratio lower for the rest of 2011," said BNP Paribas in a report released Friday. "In 2012, the silver price may in turn weaken as the outlook for gold turns more negative."

Silver peaked at $40.15 an ounce and was later bid at $39.95 an ounce against $39.27. Spot platinum was bid at $1,759.50 an ounce versus $1,748, while spot palladium was at $782.72 an ounce against $771.