Gold Dips on Stronger Dollar, Euro Worries
Source: Dow Jones Newswires, Tatyana Shumsky (11/26/10)
"The dollar set a fresh two-month high against the euro."
The most actively traded contract, for December delivery, was recently down 1.4%, or $19.70, at $1,353.30 per troy ounce on the Comex division of the New York Mercantile Exchange.
The stronger dollar weighed on gold prices, as dollar-denominated gold appears more expensive to traders using foreign currencies when the dollar strengthens. The dollar set a fresh two-month high against the euro on reports Portugal is being pressured to accept international financial aid.
Investors shed the euro, fearing that another bailout less than a week after Ireland's rescue package would destabilize the currency.
The euro was recently at $1.3218, from $1.3361 late Thursday.
The dollar's resurgent strength also enticed some safe-haven buying away from gold futures, as investors opted for the dollar over gold. Gold is considered an alternative currency and a store of value amid economic uncertainty, but investors also often view the dollar as a haven amid currency volatility.
"With the dollar being strong as a haven, it's offsetting the. . .Portugal headlines," said George Gero, vice president at RBC Capital Markets Global Futures.
Moreover, some investors are booking profits on previously purchased gold now that the dollar has regained its value.
"People are tending to take money off the table," Gero said.