Gold dropped to its lowest in almost 6-months on Thursday

Gold dropped to its lowest in almost 6-months on Thursday as the euro fell against the dollar after an Italian bond auction saw yields at an unsustainable level and renewed euro zone fears and credit tightness worries.

Echoing the weakness in gold, spot platinum fell more than 3 percent to its lowest since November 2009 and silver fell more than 3 percent to a 3-month low.

The euro fell below $1.29 for the first time in 15 months as fear that Europe’s debt crisis could worsen next year left traders scrambling to sell the currency before the calendar turns.

The latest cause of concern was Italy, which had to pay nearly 7 percent to borrow at a 10-year bond auction, a level seen as still uncomfortably high for a country with such a high debt burden and facing slow growth. A stronger U.S. unit makes dollar-priced commodities such as precious metals costlier for holders of other currencies.

“Peripheral yields are still on the rise; the 6-month Italian debt auction wasn’t that bad but the long-term auction is still lacking trust,” said VTB Capital analyst Andrey Kryuchenkov.

“Sentiment is still down since it’s the year-end and really you have larger problems at hand: the markets are still disappointed with the ECB reluctance to become the lender of last resort and changing fiscal discipline will take time.”

Spot gold fell 1.57 percent to $1,530.60 an ounce by 1427 GMT, from $1,555.19 late in New York on Wednesday.

Earlier it hit a near six-month low of $1,521.94.

U.S. gold February futures lost more 2 percent to $1,530.70.

LIQUIDITY SQUEEZE

A spiraling euro debt crisis and increased need for liquidity in the last few months have pushed banks and other financial participants to sell assets including gold, generally deemed to be a safe haven during economic woes.

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Posted by admin on Dec 29 2011. Filed under Gold price. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry