Gold slides on profit-taking as euro retreats

By Barani Krishnan and Jan Harvey

NEW YORK/LONDON (BestGrowthStock) – Gold fell more than 1 percent on Thursday as investors took profits and pondered the euro’s near-term direction and remained concerned about the euro zone debt crisis.

Gold futures fell to a near three-week low while the spot price of the shiny metal dipped below the 50-day moving average, indicating it could be headed for a bear market.

Gold’s slump came as the dollar recovered against the euro after data showed positive business conditions in the U.S. Mid-Atlantic region.

Other commodity markets generally drifted in thin trade, with the combined energy, metals and agricultural complex showing volumes at least 30 percent lower from the 30-day average by midday.

Aside from the euro, investors said few other factors influenced trading. They said the market shrugged off news about the Commodity Futures Trading Commission’s proposed rules to regulate trading.

The euro often provides direction for gold as it is another trade against the dollar.

The euro rose early on Thursday as a European Union summit to discuss the debt crisis got underway. But investors had already cautioned the currency was vulnerable to a sell-off on lingering euro zone peripheral debt concerns.

European leaders sought to paper over deep divisions on how best to resolve the debt crisis ahead of the summit, while Spain and Portugal came under renewed pressure to get their finances in order.

Attractive yields on U.S. Treasuries were also luring some gold investors to diversify into U.S. government debt.

“The Treasury yield is certainly pressuring gold prices,” said Bruce Dunn, vice-president at Auramet Trading in Fort Lee, New Jersey. “It’s also near month-end, quarter-end and year-end and people are looking to take profit as the euro continues to weaken and the debt crisis drags on.”

WEAK INDIAN BUYING

New York’s benchmark February gold futures settled down $15.20 at $1,371 an ounce after dipping to $1,362 — its lowest level since November 29.

Bids for spot gold, which reflect trades in bullion, fell to $1,361.65, below the 50-day moving average of $1,368.86. It recovered to above $1,366 an ounce by 2:30 p.m. EST.

Late Wednesday in New York, bids for gold stood at around $1,380.45.

Some were confident about the longer-term outlook for gold, saying the futures market was likely to rewrite the December 7 record high of above $1,432.50.

They said that although the euro zone crisis was weighing on the euro — and, in turn, gold — the phenomenon will ultimately favor the precious metal, as other sovereign debt crises have done in boosting demand for the safe-haven.

“I don’t think we will see a sharp decline in gold prices,” said Daniel Briesemann, a commodities strategist for Frankfurt-based Commerzbank. “The fundamental data and especially the debt crisis in the euro zone and its peripheral countries is too severe to be too optimistic.”

Andrey Kryuchenkov, analyst at VTB Capital in Moscow, made a similar point.

“Overall, economic uncertainties are gold-positive with the currency markets still jittery while fiat currency yields are set to remain low for a prolonged period of time,” Kryuchenkov said. “Safe haven buying will limit the downside on gold in the short run.”

Holdings of the world’s largest gold-backed exchange-traded fund, New York’s SPDR Gold Trust, eased by 0.6 tonnes on Wednesday, bringing total inflows in December to 0.4 tonnes versus inflows of just over 7 tonnes in the same period of 2009.

In India, the world’s largest gold consumer, buying of jewelry slowed as the wedding season neared its end. Buyers there also shrugged off the impact of a firmer rupee, which made dollar-priced gold cheaper in India.

Buyers “would hardly come…until mid-January,” said a Mumbai-based dealer.

(Additional reporting by Amanda Cooper in London; Editing by David Gregorio)

Gold slides on profit-taking as euro retreats