Forexpros – Gold futures came under pressure on Tuesday, slumping to a one-week low as a broadly stronger U.S. dollar and mounting concerns over the global economic outlook prompted investors to sell their gold positions to raise liquidity.
On the Comex division of the New York Mercantile Exchange, gold futures for December delivery traded at USD1,699.35 a troy ounce during U.S. morning trade, tumbling 1.5%.
It earlier fell by as much as 2.01% to trade at USD1,682.75 a troy ounce, the lowest price since October 25.
Concerns over the euro zone’s ongoing debt crisis intensified after Greek Prime Minister George Papandreou announced a shock referendum on Greece’s bailout plan agreed on last Thursday at a summit of European leaders.
If Greece rejects the deal it would put the next tranche of aid to Greece in jeopardy, moving the country towards the brink of default and increasing the risk of contagion in global financial markets.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, rallied for a second day, jumping 1.28% to trade at 77.62, the highest level since October 18.
Gold prices often move inversely to the U.S. dollar, as gold becomes more expensive for buyers using other currencies.
Global equities were sharply lower amid the downbeat global economic outlook. Germany’s DAX 30 index tumbled 4.2% during European afternoon trade, while the Dow Jones Industrial Average was down 2% in U.S. morning trade.
Gold is considered a refuge from financial risk, but prices can drop amid a market-wide selloff as traders sell profitable holdings to raise cash and cover losses elsewhere.
Some mild bargain buying helped gold come off its lows as traders awaited a number of key events scheduled for later in the week, which could affect prices.
The Federal Reserve’s policy-setting Federal Open Market Committee began its two-day meeting earlier Tuesday, while the European Central Bank is to meet on Thursday to discuss monetary policy.
Elsewhere on the Comex, silver for December delivery plunged 3.33% to trade at USD33.21 a troy ounce, while copper for December delivery tumbled 3.2% to trade at USD3.516 a pound.
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