Gold retreated amid a bounce in equity markets as worries over the European debt crisis and China’s monetary policy tightening subdued, lifting the commodity and banking sectors and curbing the appeal of safe haven assets such as gold.
The yellow metal was previously seen as an alternative to the US dollar and usually moved inversely to the American currency and in tandem with the euro. However, investors have increasingly been pouring money into precious metals amid rising volatility in currency and equity markets primarily caused by fears that more euro zone countries could face the situation as Greece, which ended up requesting a massive bailout package from the EU and the International Monetary Fund (IMF) to avoid insolvency.
Gold has also been seen as a hedge against currency risks as euro was brought down to four year lows against the US dollar, heavily impacted by the debt issues, while gold has recently reached all time highs of nearly US$1,250/oz on safe-haven buying.
Now, with the equity markets recovering from the sharp drops of the past two weeks, which involved a 1,000 point collapse of the Dow Jones Industrial Average, the demand for higher risk assets is climbing, pushing down the gold price.
Gold last traded at US$1,209/oz today, while silver slid to US$18.76/oz and platinum rose to US$1,671/oz
