Gold Dips as Dollar Recovers, Risk Appetite Eases
Source: Reuters (2/22/10)
". . .the dollar hit a session high against the euro amid renewed worries about Greek debt"
"We had a dip in the oil price, also in base metals, the dollar is a bit stronger and in equity markets, we've seen a trend lower," said Tobias Merath, analyst at Credit Suisse.
"A lot of financial market participants are long so there's still profit to be taken. Also there's concerns about March—it's usually the worst time of year for gold."
Spot gold was quoted at $1,113.35 by 11630 GMT, down from $1,117.50 at New York's notional close on Friday, having hit an intraday high of $1,130.65 an ounce earlier.
The dollar came off earlier lows versus the euro to hit a session high amid reports Germany has made no decision on aid for Greece.
A stronger dollar weighs on gold as it dents the metals appeal as an alternative to the U.S. currency. It also makes dollar-priced gold costlier for non-U.S. investors.
Also weighing on gold, U.S. stocks fell on Monday as markets continue to assess the implications of the Federal Reserve's move to increase emergency borrowing rates for banks and Greece's debt issues remain unresolved.
Gold, sometimes bought as a safe haven asset and hedge against financial uncertainty, has been moving in line with risk appetite and risk assets in recent weeks.
Currency markets took the Fed's surprise decision to raise its discount rate last week as a signal the U.S. central bank was coming closer to raising its benchmark rate.
Although a benign U.S. inflation reading on Friday caused markets to reassess that view, there remains underlying nervousness with regards to U.S. monetary policy.