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Gold tiptoes above $1,640 after stock recovery takes pressure off

Mass downgrades of Eurozone countries make traders cautious

Gulf News

London: Gold firmed in Europe yesterday, rising back above $1,640 (Dh6,022) an ounce, as a recovery in stock markets took some downward pressure off prices, with traders digesting last week's mass downgrade of Eurozone countries from Standard & Poor's.

The euro lifted from the near 17-month low it hit against the dollar in early trade, while European stock markets swung into positive territory. Oil prices also tracked higher.

Spot gold was up 0.1 per cent at $1,641.50 an ounce at 1007 GMT, while US gold futures for February delivery were up $11.40 an ounce at $1,642.20.

Prices are still up 5 per cent this month but fell 0.6 per cent on Friday as the euro tumbled after the S&P downgrade.

Gold's relationship to bad news on the Eurozone debt crisis has been choppy in the last year, with the metal sometimes benefiting from fears over currency debasement, sometimes falling victim to a rising dollar.

Greek impasse

"Gold is not a hedge against problems in the Eurozone, at least as far as the debt situation is concerned. That might look different in the worst case scenario," said Peter Fertig, an analyst at Quantitative Commodity Research.

Stocks and the euro fell in early trade after rating agency Standard & Poor's downgraded nine of the Eurozone's 17 countries on Friday, with France and Austria losing their top-notch status.

Mass Eurozone ratings downgrades are unlikely to shake up investors too much, but with Greek debt talks at an impasse, pressure has been loaded on the bloc to build up its defences and last week's glimmers of optimism have been firmly doused.