Forexpros – Gold futures plunged to a six-week low on Monday, breaking through key support levels after European leaders failed to convince investors that progress was made in tackling the region’s debt crisis at last week’s summit.
On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at USD1,663.75 a troy ounce during U.S. morning trade, plunging 3.1%.
It earlier fell by as much as 3.21% to trade at USD1,661.95 a troy ounce, the lowest price since October 25.
Gold futures were likely to find support at USD1,649.05 a troy ounce, the low of October 25 and resistance at USD1,727.85, the high of December 9.
Market sentiment was rattled after ratings agency Moody’s said that last week’s economic summit of European leaders failed to deliver “decisive policy measures” to end the region’s debt crisis.
The ratings agency warned that the region’s debt crisis was still in a “critical” and “volatile” stage, while adding that it will revisit ratings of all euro zone member states in the first quarter of 2012.
Also Monday, Standard & Poor’s chief European economist said Friday’s agreement was a significant step in resolving a “crisis of confidence,” but warned that time is running out and more action is needed.
The comments came after S&P placed the credit ratings of 15 euro zone members, including France and Germany, on watch for a potential downgrade last week.
EU leaders agreed to implement stricter budgetary rules across the euro zone and to provide EUR200 billion in loans to the International Monetary Fund to assist countries with debt problems.
However, investors remained uncertain over whether the measures would go far enough to tackle the region’s two-year-old debt crisis after the European Central Bank indicated that it had no plans to increase its bond purchasing program.
Although gold’s appeal as a safe haven is boosted during times of economic uncertainty, the euro zone’s debt crisis has done little to bolster appetite for the precious metal in recent weeks. A weakening euro and stronger dollar have weighed on gold instead.
The euro dropped to a two-week low against the U.S. dollar, while the dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, rallied 1.1% to trade at 80.00, the highest since October 6.
Elsewhere on the Comex, silver for March delivery plunged 3.55% to trade at USD31.10 a troy ounce, while copper for March delivery sank 2.9% to trade at USD3.454 a pound.
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