London : Gold gave up some of its early gains yesterday as the euro retreated from highs versus the dollar amid concerns over the heavy indebtedness of smaller euro zone economies like Greece and Portugal.
The precious metal had risen as high as $1,093 (Dh4,020) an ounce in earlier trade as the dollar retreated after US President Barack Obama softened his tone on bank restrictions in his State of the Union speech, lifting appetite for risk.
Spot gold was bid at $1,089.95 an ounce at 1230 GMT, against $1,087.25 late in New York on Wednesday.
Fresh trouble
"Currencies are clearly guiding the immediate direction of the precious metals, especially after fresh trouble brewing in Portugal, Italy, Greece, [and] Spain now, which threatens to undermine the health of the common currency," Pradeep Unni, senior analyst at Richcomm Global Services, said.
The dollar slipped from a six-month high versus the euro in early trade after Obama laid out plans to revive the US economy and allayed market worries about moves to limit bank risk-taking in his comments.
But it bounced back in the early afternoon as investors worried about Greece's debt, and analysts warned the euro was heading for more losses as concerns rise about the grim fiscal conditions in the euro zone.
Fiscal fear
Gold prices have declined some four per cent in the last two weeks as the dollar rallied against the euro, with fears over Greece's fiscal situation and waning risk appetite lifting the US unit at the expense of higher-yielding currencies.
"The precious metals have been struggling with dollar strength so far," Saxo Bank, senior manager Ole Hansen, said.
He said the Obama speech and expectations Federal Reserve Chairman Ben Bernanke will be reappointed had helped dispel some risk aversion. "These things have removed some uncertainty, and that has helped the market to stabilise," he said.
