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Gold hits one-week low on euro weakness
May 30, 2012 / 7:27 AM / 6 years ago

Gold hits one-week low on euro weakness

SINGAPORE (Reuters) - Gold dipped to a one-week low on Wednesday, tracking a weaker euro on heightened worries about the euro zone debt crisis as Spain’s borrowing costs spiralled towards unsustainable levels.

Gold coins are displayed at a gold jewellery showroom in Noida on the outskirts of New Delhi April 16, 2012. REUTERS/Parivartan Sharma

Gold has recently been moving in lockstep with the single currency, which fell to its lowest level against the dollar in two years as investors continue to fret about Spain’s vulnerable fiscal conditions.

“Continuous weakness in other currencies and strength in the dollar have kept gold, precious metals and commodities generally depressed,” said Jeremy Friesen, commodity strategist at Societe Generale in Hong Kong.

Spot gold fell as much as 0.6 percent to $1,544.74 an ounce earlier in the day, and later recovered some losses to trade at $1,550.54 by 0634 GMT. Prices are poised for a monthly loss of nearly 7 percent and a fourth month of decline.

U.S. gold was little changed at $1,550.

Investors are waiting for central banks to respond with more monetary measures to help shore up the economies, which would help keep funding costs low and raise the inflationary outlook - factors that will benefit gold, he said.

But political uncertainty in Greece will keep investors on edge for now. Though pro-bailout conservatives have topped recent opinion polls, analysts said the vote on the June 17 elections was still too close to call.

“Policymakers are waiting for clear commitments from some of the peripheral countries before they allow accommodation to support growth,” Friesen added.

Until the market is convinced of that intention, gold could remain in a directionless drift.

Dealers reported light buying in Asia’s physical market, but most buyers remained on the sidelines of the market awaiting cues on price direction.

“At this stage we’ve only got enquiries, and buyers are probably eyeing $1,530, which has been a support level recently,” said a Singapore-based dealer.

Purchases by India, one of the world’s top gold consumers, have been dented by the country’s weak currency and buying is likely to stay muted until the monsoon season ends in September.

Among other precious metals, spot silver lost 0.2 percent to $27.76, on course for its third consecutive session of losses.

Holdings of the iShares Silver Trust, the world’s largest silver-backed exchange-traded fund, dropped nearly half a percent from the previous session to 9,619.03 tonnes by May 29, the lowest in nearly two weeks.

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