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Wednesday December 14 , 2011 13:39 GMT
| Gold dropped near two-month low on Wednesday trading amid tensions in markets after the Italian treasury sold 3 billion euros of five-year bonds in an auction that witnessed a decline in demand and rise in yield. The selling reached the maximum target with a demand of 1.42 times compared with 1.47 last month, while the yield edged up to 6.47% from 6.29% the previous auction. The auction took place before the approval of a 30 billion-euro emergency budget plan announced on December 4 to increase the government's revenues. Tensions increased as the Bank of Spain announced today that Spanish banks borrowed an average of 98 billion euros from the ECB in November, which is the highest in more than 12 months. Meanwhile, the main concentration is still on the world's hot spot, of course the euro area which is threatening world economies with its escalating debt woes, as after last week's EU summit, German Chancellor Angela Merkel refused raising the upper limit, which was expanded to 500 billion euros, for the European Stability Mechanism (ESM) which will become effective by mid 2012, according to two officials familiar with the discussions. Today, data from the euro zone showed that industrial production slipped 0.1% in October from the prior drop of -2.0%. Now, there is uncertainty clouding recovery path in 2012 with the unknown fate of euro area economies amid the sluggish growth and escalating debt woes. On Tuesday, gold fell sharply after the Fed kept interest rate at its ultra-low level of 0.25% and mentioned that the world's no.1 economy will continue its expansion. Gold has been affected by tensions in markets where it lost its characteristic as a safe haven where it currently moves side by side with equities at the time where the dollar and yen became the most favorite refuges. Spot gold is currently traded around $1625.13 an ounce after recording a high $1641.38 and a low of $1622.88. Crude oil, also, is currently traded lower at $98.42 a barrel compared with the day's opening of $100.25. In the currency market, the dollar is showing further advance, according to the dollar index, which tracks the greenback's movements versus six major currencies, which is currently hovering around 80.45 compared with the day's opening of 80.24. |
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