ET:Gold dips but remains supported by euro zone fears
LONDON: Gold eased on Tuesday, taking its cue from the decline on the stock market after a downgrade of the debt of two major French banks because of their holdings of Greek debt.
Gold priced in euros was restricted by a pick-up in the single european currency but remained within less than 2 per cent of record highs struck the day before.
The alarm caused by the euro zone debt crisis has intensified this week after Moody's Investor Services cut its ratings on the debt of Societe Generale and Credit Agricole , France's second and third largest banks, while on Tuesday, Italy was forced to pay the highest interest on five-year debt at auction since joining the euro in 1999.
Also reflecting the unease in Washington over the crisis, US Treasury Secretary Timonthy Geithner took the unprecedented decision to attend a meeting of EU finance ministers on Friday.
The inverse correlation that has prevailed between the gold price and global equities since early July is now at its weakest in a month, meaning gold is more likely to move in tandem with the stock market.
Spot gold was last down 0.2 per cent at $1,830.19 an ounce at 0950 GMT, having lost 1.3 per cent so far this week and set for its second weekly fall, its longest since early July.
Gold priced in euros was last down 0.2 per cent at 1,337.18 euros an ounce, just 1.4 per cent shy of the all-time high at 1,373.92 euros hit on Monday.
"The market is confused over whether it will go higher or lower next. The focus has shifted to Europe and perhaps the euro (gold) price is a good indication, in that we are hovering around the highs but not making new highs," said Mitsubishi analyst Matthew Turner.
"In the background is the Fed meeting a week today. Gold was driven higher on the expectation of more Fed easing and so it's wait-and-see mode for now," he said.
Greek Prime Minister George Papandreou, French President Nicolas Sarkozy and German Chancellor Angela Merkel are due to hold a conference call later on Wednesday after talk resurfaced among euro zone policymakers about a Greek default.
