Gold weakens after Fitch warning
Singapore , December 19, 2011
Gold prices fell as much as 0.8 percent on Monday, extending their biggest weekly loss in nearly three months last week, after rating agency Fitch's warning on the possibility of downgrading France.
Fitch Ratings warned it may downgrade France and six other euro zone nations as it believes a comprehensive solution to the region's debt crisis is "technically and politically beyond reach".
The dollar rose slightly against other major currencies after news that North Korea's leader Kim Jong-il had died. A stronger dollar pressures prices of commodities, as it makes them more expensive for holders of other currencies.
Spot gold dropped to its lowest level in nearly three months, and tumbled more than 6 percent last week, sinking under funding stress and disappointment on a lack of solutions to the euro zone debt crisis.
"In the short term we are seeing greater downside for gold," said Ong Yi Ling, an analyst at Phillip Futures, adding that $1,550 would provide support in the near term.
"Gold is still taking cues from the development in Europe -- whether there will be more sovereign debt ratings downgrades."
As financial markets enter the penultimate week of the year, liquidity is expected to shrink, with investors closing their books for the year, which may leave prices prone to wild swings.
Spot gold lost 0.6 percent to $1,588.89 an ounce by 0331 GMT, after dropping 6.5 percent in the previous week. US gold edged down 0.4 percent to $1,591.40.
Technical analysis suggested that spot gold may take a while to carve out levels to the downside, but once the closing price is able to regain levels above the 200-day moving average, bullion will resume its longer-term trend.
Spot silver fell as much as 2 percent to $29.08 an ounce amid a broad retreat in prices of industrial metals and equities. It traded at $29.13. - Reuters