Forexpros – Gold futures tumbled to a two-week low on Monday, trading below the psychologically-important USD1,700-an-ounce level as a broadly stronger U.S. dollar and fears over a possible downgrade of the euro zone’s sovereign debt by Standard & Poor’s drove prices lower.
On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at USD1,691.55 a troy ounce during early European morning trade, tumbling 1.45%.
It earlier fell by as much as 1.81% to trade at USD1,685.45 a troy ounce, the lowest price since November 25.
Gold futures were likely to find short-term support at USD1,672.65 a troy ounce, the low of November 25 and resistance at USD1,727.85, the high of December 9.
A two-day summit of 27 European leaders ended on Friday with an agreement to tighten anti-deficit rules and to provide EUR200 billion in loans to the International Monetary Fund to assist countries with debt problems.
However, investors remained on edge after EU leaders failed to secure unanimous support for a new EU fiscal treaty after U.K. Prime Minister David Cameron vetoed any changes to the treaty.
Speculation that S&P will carry out a mass downgrade of 15 euro zone members, including Germany, France, Italy and Spain dampened appetite for riskier assets.
The ratings agency said last week that it would announce any ratings changes “as soon as possible” after Friday’s summit.
Also weighing on sentiment, ratings agency Moody’s warned earlier that the euro zone’s debt crisis was still in a “critical” and “volatile” stage, adding that the region still faced increasing risks to cohesion.
For much of the last year, investors’ typical reaction to downbeat news from Europe was to buy gold, as it boosts the safe haven appeal of the precious metal.
Instead, gold futures have moved largely in line with other commodities and risk-sensitive assets over the past month, with investors preferring the relative safety of the U.S. dollar.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.6% to trade at an 11-day high of 79.61.
Elsewhere on the Comex, silver for March delivery plunged 2.15% to trade at USD31.55 a troy ounce, while copper for March delivery sank 1.85% to trade at USD3.492 a pound.
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