Upcoming Webinar :Register now for 'ULIP as an investment during economic recovery' powered by Bajaj Allianz

Gold Futures Decline As Stronger Dollar Weighs

Gold futures decline as stronger dollar weighs

Nov 16, 2011 / 02:21 PM IST
Forexpros - Gold futures declined on Wednesday, as a stronger U.S. dollar and fears that the euro zone's sovereign debt crisis was spreading to the region's core economies prompted investors to sell their gold holdings and raise liquidity.

On the Comex division of the New York Mercantile Exchange, gold futures for December delivery traded at USD1,774.65 a troy ounce during early European morning trade, slumping 0.42%.

It earlier fell by as much as 1.05% to trade at a daily low of USD1,763.45 a troy ounce.

Concerns over the euro zone's debt crisis intensified after Italy's 10-year bond yields rose above 7% on Tuesday, a level widely viewed as unsustainable for long-term borrowing.

Meanwhile, Spanish 10-year yields rose above 6% for the first time since the European Central Bank started to buy the country's bonds in August.

Adding to nervousness over the region's debt crisis, French government debt came under pressure, with the 10-year yield rising to 3.69%, the highest since early May.

While the news would have normally boosted the precious metal, investors preferred to sell profitable gold holdings to raise cash and cover losses elsewhere.

Global financial service provider HSBC said in a report Tuesday that, 'Gold has persistently derived safe haven-related purchases from the euro zone sovereign debt crisis.'

However, gains have been limited as safe haven inflows 'have been largely offset by currency-related selling of gold due to a weaker euro.'

The euro traded close to a five-week low against the greenback, while the dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.24% to trade at 78.29.

A stronger U.S. dollar usually weighs on gold, as it dampens the metal's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.

Meanwhile, the ECB said on Tuesday that gold and gold receivables held by euro zone central banks fell by EUR2 million to EUR419.82 billion in the week ending Nov 11.

Gold holdings fell due to the sale of gold by one euro zone central bank, consistent with the latest Central Bank Gold Agreement, the ECB said.

Elsewhere on the Comex, silver for December delivery dropped 0.65% to trade at USD34.23 a troy ounce, while copper for December delivery tumbled 1.25% to trade at USD3.458 a pound.

Forexpros - Forexpros offers a diverse set of professional tools for Forex, Futures and CFDs. These include real-time data streams, technical and fundamental analysis by in-house experts, and a widely used economic calendar and Forex News.
first published: Nov 16, 2011 02:21 pm

stay updated

Get Daily News on your Browser