Forexpros – Gold futures turned lower on Wednesday, erasing earlier gains as fears that the euro zone’s sovereign debt crisis was worsening prompted investors to sell their gold positions to raise liquidity and cover losses elsewhere.
On the Comex division of the New York Mercantile Exchange, gold futures for December delivery traded at USD1,692.75 a troy ounce during early U.S. morning trade, declining 0.57%.
It earlier fell by as much as 0.87% to trade at a daily low of USD1,685.35 a troy ounce.
Concerns over the euro zone’s debt crisis intensified after Germany’s Treasury auctioned just EUR3.64 billion of 10-year government bonds with the average yield set at 1.98% in an auction earlier. Total bids for German debt fell short of the maximum amount available by 35%, the worst demand on record.
The auction came after preliminary data showing that the euro zone manufacturing purchasing managers’ index slumped to the lowest level since July 2009 in November, falling to 46.4 from 47.1 in October.
Manufacturing output in Germany also dropped to a 28-month low, underlining fears that the euro zone could be slipping into a recession.
Adding to nervousness over the region’s debt crisis, Belgian media outlets reported that Belgium and France were in fresh talks over an existing rescue deal for troubled lender Dexia, which could see France take on a larger role in the bailout plan.
Ratings agency Fitch warned earlier that France’s triple-A credit rating would be at risk if a further deterioration of the euro zone debt crisis resulted in an economic downturn in France.
While the news would have normally boosted the safe haven appeal of the precious metal, investors preferred to sell profitable gold holdings to raise cash and cover losses elsewhere.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.7% to trade at 78.95.
Global financial service provider HSBC Holdings said in a report earlier that gold’s recent declines look “more and more like a replay of the selloffs in late September, when the metal sank in a panic-fueled rout along with industrial commodities and equities.”
Elsewhere on the Comex, silver for December delivery plunged 3.8% to trade at USD31.70 a troy ounce, while copper for December delivery tumbled 2.2% to trade at USD3.259 a pound.
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