Gold futures fall to 2-day low as stronger dollar weighs

Investing.com – Gold futures were down for a second day on Tuesday, as fears that the euro zone’s sovereign debt crisis is worsening prompted investors to sell their gold positions to raise liquidity and cover losses elsewhere.  

On the Comex division of the New York Mercantile Exchange, gold futures for December delivery traded at USD1,770.45 a troy ounce during early European morning trade, sliding 0.45%.     

It earlier fell by as much as 0.6% to trade at a USD1,767.25 a troy ounce, the lowest since November 11. 

Concerns over the euro zone debt crisis intensified after yields on Italian five-year government bonds rose to a euro-era high of 6.29% on Monday, up from 5.32% in a previous sale last month.

Adding to nervousness over the region’s debt crisis, Spanish government debt came under pressure ahead of next week’s general elections, with the 10-year yield rising above 6.0% for the first time since early August.

While the news would have normally boosted the precious metal, investors preferred to sell profitable gold holdings to raise cash and cover losses elsewhere.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.22% to trade at 77.82.

A stronger U.S. dollar usually weighs on gold, as it dampens the metal's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.

Meanwhile, hedge fund billionaire John Paulson reduced his gold holdings during the third quarter, according to a filing with the Securities and Exchange Commission Monday.  

Paulson & Company cut its stake in the SPDR Gold Trust, the biggest exchange-traded fund backed by the precious metal, to 20.3 million shares in the third quarter from 31.5 million as of June 30.

Many gold traders have been worried of mass liquidation by Paulson and what that would do to investor psychology in the gold market. Gold prices tumbled 11% in September amid widespread talk of possible selling by big hedge funds covering losses in other markets.

Elsewhere on the Comex, silver for December delivery eased up 0.05% to trade at USD34.04 a troy ounce, while copper for December delivery gained 0.4% higher to trade at USD3.502 a pound.