NEW YORK (TheStreet ) -- Gold prices were slipping Monday as investor risk appetite returned and traders sold gold for riskier assets.
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Gold for August delivery was slipping $5.40 to $1,224.80 an ounce at the Comex division of the New York Mercantile Exchange. The gold price Monday has traded as high as $1,235.90 and as low as $1,224.50. The U.S. dollar index was falling more than 1% to $86.38 while the euro rallied 1.18% to $1.22 against the dollar. The gold spot price Monday was losing more than $3, according to Kitco's gold index.
With no bad news coming out of the European Union over the weekend, investors' risk appetite improved and traders tentatively sold gold for stocks. Global stock markets were posting modest gains encouraged by the U.S. late-day rally on Friday.
Gold prices were bracing for more volatility ahead as they continue to take their cue from the risk trade. In the short term, a weaker U.S. dollar could boost demand for gold as the dollar-backed commodity becomes cheaper to buy in other currencies and any pullback to the $1,220 level could entice bargain-hunters looking to buy gold at a "discount."
Waiting in the wings for gold is sovereign debt risk from Spain. Although Spain denied rumors last week that it would be the next EU nation to request bailout funds, the country's yields are on the rise. Bond yields rise when the government must sweeten the pot for investors to lend the country money. Currently the yield on Spain's 10-year bond is 4.59% while Portugal's is 5.33%. These levels are a far cry from Greece's double-digit yield at the height of its financial crisis, but investors are still worried. Any bad news out of the eurozone would trigger a flight to safety into gold as investors buy the metal as a form of money that retains value when paper currencies flail.
Gold bulls hope that prices can conquer their record high last week of $1,254 an ounce. But gold set that record intraday and settled under $1,250 leaving many analysts wondering if this bullish momentum can really be trusted.
