Gold eases as stock markets fall

London: Gold eased yesterday, caught up in the sale of other assets as equity markets fell for a second session and as high prices discouraged fresh buying.

Spot gold was bid at $1,213.05 (Dh4,454.32) an ounce at 1207 GMT, against $1,218.00 late in New York on Friday. US gold futures for August delivery eased $2.40 to $1,215.30.

"The price at $1,200 is quite high for anybody to get into the market," said Afshin Nabavi, head of trading at MKS Finance. "The open position on Comex is showing quite hefty longs already, so it will need a correction to generate fresh interest."

"The danger for gold right now is being caught in the crossfire of other assets falling, triggering margin calls," said UBS analyst Edel Tully in a note. The cost of protection against a government debt default also rose for France and several peripheral euro zone countries as concern grew over Hungary's debt levels.

The new Hungarian government spooked investors on Friday when a prime minister's spokesman said he supported the view the country had only a slim chance of avoiding the kind of debt crisis that plunged Greece into financial instability.

The euro recovered some ground after hitting its lowest in more than four years against the dollar yesterday, but investors remain nervous about further losses in the currency after a clear break below chart support at $1.2135.

Its slide helped euro-priced gold hit a record 1,025.72 euros (Dh4,504.70) an ounce yesterday, though it later slipped down to 1,014.93 an ounce as the euro lifted from lows.

The single currency is still down more than 16 per cent this year versus the dollar on concerns about government debt. A strong dollar usually pressures gold, but the relationship has weakened as both are being purchased to protect against risk.

In investment news, holdings of the world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust, eased a touch on Friday to 1,286.359 tonnes from a record 1,289.839 tonnes the previous day.

At the same time holdings of the biggest silver-backed ETF, the iShares Silver Trust, fell more than 45 tonnes to 9,208.83 tonnes.

Prices: Daunting figures