Gold weaker, focus on dollar gains, Europe crisis

By Elizabeth Fullerton

LONDON (BestGrowthStock) – Gold fell 1 percent on Friday as the dollar pushed to fresh two-month highs against the euro on worries that Ireland’s debt crisis was spreading and growing speculation of an imminent Portuguese bailout.

However, gold was underpinned by some modest safe haven buying amid investor nervousness over the European debt crisis after a newspaper report that euro zone nations were pressuring Portugal to follow Ireland’s lead and seek a bailout.

Portugal and Germany’s finance ministry denied the report.

Spot gold was trading at $1,359.50 an ounce by 1143 GMT from $1,374.12 late on Thursday, just off an intraday low of $1,357.95. Gold futures were down 1 percent at $1,359.5

Trade was fairly thin as U.S. markets were closed for a second day following the U.S. Thanksgiving holiday.

On a weekly basis, gold was headed for a 1.3 percent rise, snapping two consecutive weeks of losses.

“Investors are eyeing a strengthening dollar and see no reason to hold gold in a strengthening dollar environment,” said David Wilson, analyst at Societe Generale.

Gold’s traditional inverse relation to the U.S. dollar broke down in May this year when the euro zone’s debt problems became apparent, prompting investors to dump the single European currency.

In euro terms, gold was trading moderately higher at 1,031.47 euros an ounce compared with 1,028.76 euros late on Thursday, having broken through the 1,000 euros mark on Monday for the first time in a week.

“As Eurozone funding worries are not going to go away, it is against the euro that gold should be gauged,” UBS analyst Edel Tully said in a report on Friday.

Noting that gold looked set for its first positive weekly close since November 5, she said: “We view this resilience as a sign of gold starting to enjoy some safe-haven demand in response to events in Europe.”

The euro fell (Read more about the trembling euro. ) to a fresh two-month low of $1.3242 against a resurgent dollar in early European trade, while the Spanish/German 10-year bond yield rose to a euro-lifetime high as the market focused on the likelihood of Ireland’s debt crisis spilling over to Spain and Portugal.

Saber-rattling by North Korea following its shelling of the South earlier this week added to an uncertain geopolitical picture which could lend gold some support from more risk-averse investors.

North Korea said on Friday that impending military exercises by the South and the United States were pushing the region toward war.

The rest of the precious metals complex was mixed on Thursday. Silver fell to $27.14 from $27.54 late on Thursday and platinum dipped to $1,641.74 an ounce against $1,655.95 but palladium rose to $673.47 from

$695.23.

(Editing by Sue Thomas)

Gold weaker, focus on dollar gains, Europe crisis