LONDON: Gold prices fell for a second day on Wednesday, testing support near $1,530 an ounce, under the influence of a weaker euro as the euro zone debt crisis engulfed Spain and sent investors scrambling for a safe haven in the form of US dollars.
The euro extended losses against the dollar to a new 23-month low in early New York trade as Italian borrowing costs soared and concerns mounted over Spain's banking sector and upcoming Greek elections.
Spot gold slid to a low of $1,531.49 and was down 1.2 percent on the day at $1,536.50 an ounce by 1353 GMT. US gold futures for August delivery were down $13.10 an ounce at $1,537.90.
Gold prices has fallen by more than 7 percent in May, marking its worst monthly performance since December, when it fell by nearly 11 percent.
"Nothing is able to withstand the current dollar strength," Saxo Bank vice-president Ole Hansen said. "The secure government yield levels continue to fall to unbelievably low levels, a clear sign of the stress the financial markets are under."
"Gold is still stuck in its major $1,520 to $1,600 range, and once again it looks like we have to determine exactly how strong that support is."
The euro briefly lifted from lows in earlier trade after EU Commission said the euro zone should move towards the direct recapitalisation of banks from its permanent bailout fund, lifting the euro. Those gains were short-lived, however.
The single currency came under further pressure after the outcome of an election in Greece next month, which may determine whether Athens can stay in the euro, was thrown into doubt when a poll suggested the anti-bailout SYRIZA party would win.
Italian government bond yields broke above the 6 percent danger level on Wednesday as investors required higher returns to buy debt issued by the euro zone's third-largest economy at an auction tainted by banking troubles in neighbouring Spain.
Market players are worried about Spain's plans to raise new funds to recapitalise nationalised lender Bankia when the country's borrowing costs are rising daily and are flirting with euro-era highs.
"As we've seen during other periods of extreme risk aversion, investors go into Treasury bonds, which are yielding record lows, or they stay in cash. It's preservation of capital," Robin Bhar, an analyst at Societe Generale, said.
EURO LINK HOLDS
Gold's correlation to the euro softened a touch on Wednesday, easing to 52.0 from closer to 57.0 a week ago, meaning that the two assets are still more likely to move in sync with one another than they were in early May, when this relationship was at its weakest in six months.
"The song remains the same as well as the market slavishly follows the euro on its ups and downs. The situation in Europe seems to be going from bad to worse, with Spain now teetering on the brink as well as Greece," Marex Spectron head of precious metals David Govett said in a note.
NEAL 9999974733
The euro extended losses against the dollar to a new 23-month low in early New York trade as Italian borrowing costs soared and concerns mounted over Spain's banking sector and upcoming Greek elections.
Spot gold slid to a low of $1,531.49 and was down 1.2 percent on the day at $1,536.50 an ounce by 1353 GMT. US gold futures for August delivery were down $13.10 an ounce at $1,537.90.
Gold prices has fallen by more than 7 percent in May, marking its worst monthly performance since December, when it fell by nearly 11 percent.
"Nothing is able to withstand the current dollar strength," Saxo Bank vice-president Ole Hansen said. "The secure government yield levels continue to fall to unbelievably low levels, a clear sign of the stress the financial markets are under."
"Gold is still stuck in its major $1,520 to $1,600 range, and once again it looks like we have to determine exactly how strong that support is."
The euro briefly lifted from lows in earlier trade after EU Commission said the euro zone should move towards the direct recapitalisation of banks from its permanent bailout fund, lifting the euro. Those gains were short-lived, however.
The single currency came under further pressure after the outcome of an election in Greece next month, which may determine whether Athens can stay in the euro, was thrown into doubt when a poll suggested the anti-bailout SYRIZA party would win.
Italian government bond yields broke above the 6 percent danger level on Wednesday as investors required higher returns to buy debt issued by the euro zone's third-largest economy at an auction tainted by banking troubles in neighbouring Spain.
Market players are worried about Spain's plans to raise new funds to recapitalise nationalised lender Bankia when the country's borrowing costs are rising daily and are flirting with euro-era highs.
"As we've seen during other periods of extreme risk aversion, investors go into Treasury bonds, which are yielding record lows, or they stay in cash. It's preservation of capital," Robin Bhar, an analyst at Societe Generale, said.
EURO LINK HOLDS
Gold's correlation to the euro softened a touch on Wednesday, easing to 52.0 from closer to 57.0 a week ago, meaning that the two assets are still more likely to move in sync with one another than they were in early May, when this relationship was at its weakest in six months.
"The song remains the same as well as the market slavishly follows the euro on its ups and downs. The situation in Europe seems to be going from bad to worse, with Spain now teetering on the brink as well as Greece," Marex Spectron head of precious metals David Govett said in a note.
NEAL 9999974733
No comments:
Post a Comment
If you have any doubts, Please let me know