Gold hits one-week low on euro weakness

Singapore: Gold dipped to a one-week low on Wednesday, tracking a weaker euro on heightened worries about the euro zone debt crisis as Spain’s borrowing costs spiralled towards unsustainable levels.

Gold has recently been moving in lockstep with the single currency, which fell to its lowest level against the dollar in nearly two years as investors continue to fret about Spain’s vulnerable fiscal conditions.

“Continuous weakness in other currencies and strength in the dollar have kept gold, precious metals and commodities generally depressed,” said Jeremy Friesen, commodity strategist at Societe Generale in Hong Kong.

Investors are waiting for central banks to respond with more monetary measures to help shore up the economies, which would help keep funding costs low and raise the inflationary outlook -- factors that will benefit gold, he said.

But political uncertainty in Greece will keep investors on edge for now. Though pro-bailout conservatives have topped recent opinion polls, analysts said the vote on the 17 June elections was still too close to call.

“Policymakers are waiting for clear commitments from some of the peripheral countries before they allow accommodation to support growth,” Friesen added.

Until the market is convinced of that intention, gold could remain in a directionless drift.

Spot gold lost 0.4% to $1,547.76 an ounce by 09:30 am, extending a decline of more than 1% in the previous session. Prices are poised for a monthly loss of 7% and a fourth month of decline.

US gold inched down 0.1% to $1,547.

The Indian rupee currency softened towards a record low hit last week. The weakness in the rupee has dented demand from one of the world’s top gold consumers this year, and buying is likely to stay muted until the monsoon season ends in September.

The price drop in global markets has yet to trigger interest from Asia’s bullion buyers, dealers said.

“At this stage we’ve only got enquiries, and buyers are probably eyeing $1,530, which has been a support level recently,” said a Singapore-based dealer.

Among other precious metals, spot silver lost 0.4% to $27.70, on course for its third consecutive session of losses.

Holdings of the iShares Silver Trust, the world’s largest silver-backed exchange-traded fund, dropped nearly half a percent from the previous session to 9,619.03 tonnes by 29 May, the lowest in nearly two weeks.