Investing.com – Last week saw gold futures settle close to a four-week low on Friday, as fears that the euro zone’s debt crisis was worsening prompted investors to liquidate gold positions in favor of the relative safety of the U.S. dollar.
On the Comex division of the New York Mercantile Exchange, gold futures for December delivery settled at USD1,681.25 a troy ounce by close of trade on Friday, dropping 2.5% over the week, the second consecutive weekly decline.
Gold’s losses on Friday came as Italian 10-year bond yields climbed to near unsustainable levels, spiking to as high as 7.36% even as the European Central Bank bought bonds in the secondary market.
The rise in Italian borrowing costs came after a disappointing auction of Italian government debt, adding to fears that the debt crisis in the region is deepening.
The auction came two days after Germany, the euro zone’s largest economy, missed its EUR6 billion sales target at an auction of 10-year bonds, in its least successful debt sale since the launch of the single currency.
Also Friday, ratings agency Standard & Poor's downgraded Belgium's credit rating by one notch, with a negative outlook, citing renewed funding and market risk pressure.
Although gold is usually regarded as a safe haven asset in times of economic uncertainty, the precious metal has tended to move in line with other risk-sensitive commodities in recent sessions, with investors piling in to the relative safety of the U.S. dollar.
The greenback jumped to a seven-week high against the euro, while the dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, rose 0.74% to settle at 79.83 by close of trade on Friday, the highest since October 6.
On Thursday, Fitch Ratings cut Portugal's sovereign debt rating to junk status, a day after warning that France could lose its triple-A credit rating if European Union leaders fail to take action to prevent the crisis from worsening.
Investors also remained jittery after comments by German Chancellor Angel Merkel underlined concerns that European leaders would be unable to find a resolution to the debt crisis.
Speaking at a joint news conference with France's Nicolas Sarkozy and Italy's Mario Monti following a meeting on Thursday, Merkel reiterated her belief that joint euro zone bonds would remove incentives for individual states to improve their fiscal discipline and rejected calls for an expanded role for the ECB in fighting the debt crisis.
Meanwhile, prices remained supported amid further evidence of central bank demand for gold. Data from the International Monetary Fund released Wednesday showed that central banks bought nearly 26 tonnes of gold in October.
Swiss financial service provider UBS said in a report that, “Given gold's much more attractive levels in October, we would not be surprised if a similar trend of significantly more buying than is reflected by IMF data actually occurred during the month.”
Elsewhere on the Comex, silver for December delivery settled at USD30.97 a troy ounce by close of trade on Friday, tumbling 4.4% on the week, while copper for December delivery settled at USD3.279 a pound, dropping 3.45% over the week.
In the week ahead, investors will be eyeing an auction of Belgian government debt on Monday after ratings agency Standard & Poor's downgraded its rating on Belgium by one notch on Friday.
Meanwhile, euro zone finance ministers are to meet Wednesday to discuss details on leveraging the region's bailout fund, although a major announcement is unlikely.
On the Comex division of the New York Mercantile Exchange, gold futures for December delivery settled at USD1,681.25 a troy ounce by close of trade on Friday, dropping 2.5% over the week, the second consecutive weekly decline.
Gold’s losses on Friday came as Italian 10-year bond yields climbed to near unsustainable levels, spiking to as high as 7.36% even as the European Central Bank bought bonds in the secondary market.
The rise in Italian borrowing costs came after a disappointing auction of Italian government debt, adding to fears that the debt crisis in the region is deepening.
The auction came two days after Germany, the euro zone’s largest economy, missed its EUR6 billion sales target at an auction of 10-year bonds, in its least successful debt sale since the launch of the single currency.
Also Friday, ratings agency Standard & Poor's downgraded Belgium's credit rating by one notch, with a negative outlook, citing renewed funding and market risk pressure.
Although gold is usually regarded as a safe haven asset in times of economic uncertainty, the precious metal has tended to move in line with other risk-sensitive commodities in recent sessions, with investors piling in to the relative safety of the U.S. dollar.
The greenback jumped to a seven-week high against the euro, while the dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, rose 0.74% to settle at 79.83 by close of trade on Friday, the highest since October 6.
On Thursday, Fitch Ratings cut Portugal's sovereign debt rating to junk status, a day after warning that France could lose its triple-A credit rating if European Union leaders fail to take action to prevent the crisis from worsening.
Investors also remained jittery after comments by German Chancellor Angel Merkel underlined concerns that European leaders would be unable to find a resolution to the debt crisis.
Speaking at a joint news conference with France's Nicolas Sarkozy and Italy's Mario Monti following a meeting on Thursday, Merkel reiterated her belief that joint euro zone bonds would remove incentives for individual states to improve their fiscal discipline and rejected calls for an expanded role for the ECB in fighting the debt crisis.
Meanwhile, prices remained supported amid further evidence of central bank demand for gold. Data from the International Monetary Fund released Wednesday showed that central banks bought nearly 26 tonnes of gold in October.
Swiss financial service provider UBS said in a report that, “Given gold's much more attractive levels in October, we would not be surprised if a similar trend of significantly more buying than is reflected by IMF data actually occurred during the month.”
Elsewhere on the Comex, silver for December delivery settled at USD30.97 a troy ounce by close of trade on Friday, tumbling 4.4% on the week, while copper for December delivery settled at USD3.279 a pound, dropping 3.45% over the week.
In the week ahead, investors will be eyeing an auction of Belgian government debt on Monday after ratings agency Standard & Poor's downgraded its rating on Belgium by one notch on Friday.
Meanwhile, euro zone finance ministers are to meet Wednesday to discuss details on leveraging the region's bailout fund, although a major announcement is unlikely.