Forexpros – Gold futures were sharply lower on Monday, as market sentiment was hit by growing fears over sovereign debt issues in the euro zone and the U.S., boosting demand for the safe haven greenback.
On the Comex division of the New York Mercantile Exchange, gold futures for December delivery traded at a three-week low of USD1704.65 a troy ounce during European morning trade, tumbling 1.19%.
Earlier in the day, the spread between 10-year Spanish bond yields and their German counterparts widened as investors remained jittery despite the election of a new government.
Spain’s center-right opposition People’s Party took a majority in Parliament after elections on Sunday and was expected to push through drastic austerity measures to try shore up the country’s economy and regain the country’s triple A credit rating.
Also Monday, rating agency Moody’s said a rise in French government debt yields and weaker growth prospects could be negative for the outlook on the country’s credit rating.
Meanwhile, speculation that a U.S. congressional “super committee” was set to announce that it had failed in a three-month-long effort to draft a USD1.2 trillion deficit reduction plan weighed on market sentiment.
Gold remained vulnerable on the risk that investors may have to liquidate their gold positions to cover losses elsewhere, since funding has become difficult as a result of market turmoil in recent months.
In Asia, physical demand remained muted as investors held off for lower prices as the near-term outlook remained unclear.
Elsewhere on the Comex, silver for December delivery plunged 3.8% to trade at USD31.18 a troy ounce, while copper for December delivery fell 2.72% to trade at USD3.309 a pound.
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