Forexpros – Gold prices dropped Monday as markets digested the impact of Friday’s European decision to adopt greater fiscal integration and cooperation despite Britain’s refusal to go along with the rest of the 27-member European Union.
On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at USD1,711.65 a troy ounce during Asian trading, down 0.29% although slightly firmer from a session low of 1,711.35 and comfortably below a session high of 1718.75.
Gold futures were likely to find short-term support at USD1,707.45 a troy ounce, Friday’s low, and resistance at USD1,718.75, today’s peak.
In Europe on Friday, European Union nations signed a treaty calling for greater fiscal coordination among member nations, although Britain held out on grounds that the treaty came with proposals it found unacceptable such as financial transaction taxes, which London feels would hurt its markets.
European leaders also agreed to allocate 200 billion euros to the International Monetary Fund to help bolster European assistance funds.
Going into 2012, European leaders will have at their discretion funds from a 500 billion euro European Stability Mechanism on top of an existing but temporary 440 billion euro European Financial Stability Facility to aid economies finding themselves in trouble.
However, gold, which often trades inversely of paper currencies, waned as the market remained unclear as to the role of the European Central Bank in the crisis.
The monetary authority has said it won’t ramp up purchases of sovereign debt issued by debt-ridden Greece, Italy or other countries at the hot zone of the crisis, as doing so would violate its mandate to keep prices stable.
Furthermore, while investors applauded the results of the European summit, the euphoria may be waning as markets focus now on turning treaty commitments into reality from rhetoric.
A stronger dollar, meanhwhile, served as an attractive alternative to skeptical euro investors than did gold in early Monday trading.
Elsewhere on the Comex, silver for March delivery was down 1.44% and trading at USD31.79 a troy ounce, while copper for March was down 1.62% at USD3.515 a pound.
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