Gold futures slump as euro zone concerns linger

Gold futures slump as euro zone concerns linger

October 18, 2011 / 01:59 PM IST
Forexpros - Gold futures were down for a second day on Tuesday, tracking other commodities lower amid lingering concerns over the euro zone's sovereign debt crisis.

On the Comex division of the New York Mercantile Exchange, gold futures for December delivery traded at USD1,664.15 a troy ounce during late Asian trade, dropping 0.74%.

It earlier fell by as much as 0.97% to trade at USD1,660.85 a troy ounce, the lowest price since October 13.

Hopes for a comprehensive solution to the financial crisis in the euro zone were dented on Monday after German Finance Minister Wolfgang Schaeuble said the EU summit due to be held on October 23 would not yield a 'definitive solution' to the crisis.

His comments came after German Chancellor Angela Merkel said "the dream of resolving all problems at the EU summit cannot be fulfilled'.

Meanwhile, ratings agency Moody's on Tuesday put France on three months notice that "pressure from weaker debt metrics," could leave the country with a negative credit outlook and could result in a downgrade.

For much of the last year, investors' typical reaction to bad news from Europe was to buy gold. However, the recent volatility in gold prices has damaged the precious metal's appeal as a safe haven and a good store of value during economic turmoil.

Also weighing sentiment, official data showed that China's economy grew at the slowest rate since 2009 in the third quarter, expanding at a rate of 9.1%, slowing from growth of 9.5% in the preceding quarter.

Swiss lender UBS reduced its average gold price forecast for the remainder of the year to USD1,615 an ounce from a previous estimate of USD1,665, citing the impact of a stronger dollar and the ongoing euro zone debt crisis.

"Gold has stepped into new territory, acting like a hybrid of a risk asset and a safe haven, as it tries to find a balance between the two opposing forces," the bank said in a report.

UBS added that the most serious risk to gold is 'a rapid deterioration in bank funding and escalating liquidity concerns.'

Elsewhere on the Comex, silver for December delivery dropped 1.17% to trade at USD31.45 a troy ounce, while copper for December delivery tumbled 2.29% to trade at USD3.300 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: Oct 18, 2011 01:59 pm

stay updated

Get Daily News on your Browser
Sections