By April H. Lee, MarketWatch
NEW YORK (MarketWatch) -- Gold wavered around $1,180 an ounce Tuesday as worries about inflation and the euro zone abated.
The metal see-sawed to either side of the flat line after touching two-month lows the prior session.
Gold futures for August delivery were up 90 cents at $1,182.80 an ounce in electronic trade on the Comex division of the New York Mercantile Exchange. Shares of the SPDR Gold Trust's ETF (GLD 115.88, +0.15, +0.13%) were down 0.63%.
Interest in gold fell further as concerns about debt problems in Europe diminished. Even after Moody's Investors Service cut Ireland's credit rating Monday, the country successfully sold 1.5 billion euros ($1.9 billion) of government bonds Tuesday and completed 83% of this year's funding, bolstering investor confidence in European sovereigns. Read more about Ireland's auction here.
The dollar also strengthened after a worse-than-expected report showed that June U.S. housing starts fell 5% to a 549,000 pace. The dollar index (DXY 82.99, +0.48, +0.58%) , which tracks the greenback against a basket of six major currencies, traded at 82.94, up 0.52%. Read more about the housing report here.
But the decline is also both a price correction and driven by investor expectations of deflation, said Jeffrey Friedman, a senior market strategist with Lind-Waldock.
"We were due for a correction. Gold had a nice run, making new highs when everything else could not," said Friedman.
"People are unwinding their gold positions in a continuation of a deflationary concept," he said. The analyst pointed to stagnant top-line results in recent earnings announcements and readings of low inflation from price indexes and the Federal Reserve. "Investors are showing no fear of inflation."
