Gold prices rallied 3 percent on Friday and were on track to end June with their first monthly rise in five as a deal to shore up banks and cut borrowing costs at a European Union summit sparked a surge in assets seen as higher risk.

Euro zone leaders agreed to take emergency action to bring down Italy's and Spain's spiraling borrowing costs and to create a single supervisory body for euro zone banks by the end of this year, a first step towards a European banking union.

The news sparked a sharp rally in European shares and a near $4-a-barrel gain in oil prices.

Spot gold was up 3 percent at $1,596.76 an ounce at 9.03 a.m. EDT, while U.S. gold futures for August delivery were up $47.40 an ounce at $1,597.70.

Still, the metal stayed on track for its biggest quarterly drop since the three months to September 2008, down 4.3 percent since end March. In that period, the dollar rose and hopes faded that the Federal Reserve would unveil further monetary easing.

The event that could trigger the spark that puts some life back into gold is however difficult to find at the moment, so before we move higher, there is a risk that we need to clear the table, which could be triggered by a move below $1,500

The July gold futures on the COMEX today rose to 1597.8 dollars per ounce.