Reuters reported that gold steadied in Europe after falling to 4 month low in the previous session, as an uptick in the euro after Spain moved to clean up its banks and Europe's bailout fund approved a key payment to Greece took some pressure off prices.
While the euro zone debt crisis is continuing to simmer, moves to address some of its problems are improving appetite for assets seen as higher risk, like stocks and commodities, as well as the single currency.
Prices have fallen 3% this week as concerns over the euro zone debt crisis pressured the euro and other risk assets. While investors bought gold as a haven from risk during the debt crisis last year, it is now trading more in line with its traditional drivers, the dollar and other commodities.
Mr Anne Laure Tremblay an analyst at BNP Paribas said that "Gold seems to be currently trading more as a risky asset than a safe haven. While the US dollar has gained on the back of higher risk aversion, gold was sold off. The decline is likely a consequence of liquidation in the paper market rather than lack of interest on the physical side."
Gold has a close negative correlation with the dollar, strength in which makes commodities priced in the US unit more expensive for other currency holders and curbs gold's appeal as an alternative asset. While it has outperformed the euro so far this year the single currency is down 3 percent versus the euro, while gold is up 1.5% dollar strength is weighing heavily on prices.
