Gold slips as dollar benefits from Goldman Sachs fraud case and Greek uncertainty

08:40, April 20, 2010      

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Gold futures on the COMEX Division of the New York Mercantile Exchange ended lower on Monday, as dollar rose against other major currencies. Sliver and platinum both rose.

The most active gold contract for June delivery dropped 1.1 U.S. dollars, or 0.1 percent, to finish at 1,135.8 dollars per ounce.

Goldman Sachs' predicament continued to haunt commodities markets on Monday, due to the fact that it has sparked investors' liquidation fear that other financial institutions that participated in mortgage-backed securities may also face similar charges, and the U.S. government may apply stricter standards to regulate the derivatives market. As a consequence, investors who have lost their risk appetite kept dumping commodities including gold on Monday, and boosted safe-haven demand of the U.S. dollar.

Meanwhile, the concern over the effectiveness of the bailout plan proposed by European finance ministers continued to weigh on the euro as the borrowing cost of Greece rose to a new high recently. Investors worried that other debt-plagued European countries like Portugal may also face default, and there's no specific plan to help them. The weaker euro has also fueled the dollar rally, which reduced the appeal of gold as an alternative asset, and dragged down the gold price.

The index of U.S. leading economic indicators rose by 1.4 percent in March, which is stronger than previous estimates, Congress Board said on Monday. This suggested that U.S. economic recovery has become more broad-based and vigorous, and underpinned investors' speculation that the Federal Reserve may start raising interest rates in the second half of this year, which has added to the downward pressure on gold, since higher interest rates would increase the opportunity cost of holding non-interest bearing gold.

May silver rose 5.6 cents to 17.731 dollars per ounce. July platinum was up 1.3 dollars to 1,696.6 dollars an ounce.



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