Forexpros – Gold prices edged lower on Monday, extended last week’s 7% plunge as news of the death of North Korean leader Kim Jong il and ongoing fears over mass euro zone credit rating cuts boosted the U.S. dollar.
On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at USD1,594.25 a troy ounce during early European morning trade, slumping 0.57%.
It earlier fell by as much as 0.95% to trade at a daily low of USD1,585.65 a troy ounce.
Gold futures were likely to find short-term support at USD1,577.45 a troy ounce, Friday’s low and resistance at USD1,645.65, the high of December 14.
Earlier in the day, reports emerged that long-time North Korean leader Kim Jong il had passed away, fuelling concerns over potential geopolitical instability across the region.
The news saw risk aversion sharpen, boosting demand for the U.S. dollar. The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.2% to trade at 80.86.
Gold is often considered a haven during times of political and financial turmoil, but for the past two months the precious metal has risen and fallen in line with other risk-sensitive assets, with investors preferring the relative safety of the greenback.
Gold prices came under additional pressure after ratings agency Fitch announced Friday that it lowered France’s rating outlook and put six other euro zone members, including Italy and Spain, on review for a downgrade, saying that a “comprehensive solution” to the euro-zone crisis is “technically and politically beyond reach.”
Moody’s Investors Service also downgraded Belgium two notches to Aa3, citing “increasing risks due to deteriorating market funding conditions”.
Furthermore, European Central Bank President Mario Draghi told the Financial Times over the weekend he was sticking with his opposition to intervening in the bond markets and buying up sovereign debt in order to ease the region’s ongoing debt crisis.
Later in the day, European Union leaders were to hold talks to discuss measures to resolve the region’s debt crisis, including the possibility of European nations lending EUR200 billion to the International Monetary Fund.
Elsewhere on the Comex, silver for March delivery tumbled 2.05% to trade at USD29.07 a troy ounce, while copper for March delivery fell 0.9% to trade at USD3.302 a pound.
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