Gold plunges below 1,200 U.S. dollars as euro recovers

09:06, May 20, 2010      

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Gold futures on the COMEX Division of the New York Mercantile Exchange slumped Wednesday on diminishing refuge buying as euro recovered from 4-year lows against U.S dollar. Silver nosedived, platinum witnessed the biggest fall since December 2008.

The most active gold contract for June delivery dropped 21.5 U. S. dollars, or 1.8 percent, which is the largest decline for a most-active contract since April 16, to finish at 1,193.1 dollars.

Germany's financial regulator announced late Tuesday that it would ban short selling on some European bank shares and eurozone' s government bonds in order to prop up the euro. Euro slid initially after the announcement but pared earlier losses later on speculation that European leaders are committed to support the currency and prevent eurozone from disintegration.

Gold price usually moves in tandem with euro as alternative assets of U.S. dollar, but gold ignored the strong inverse correlation with dollar for several times recently, as investors considered gold as a good store of value and purchased it as a hedge against euro amid eurozone debt crisis. The speculation that euro may get some serious and substantial help from eurozone members had eroded gold's appeal of safe haven.

Traders noted that the sharp retreats in equity and oil markets Wednesday have triggered a round of selling in gold market as many investors sold gold to cover margin calls in other assets.

July silver plunged 76.4 cents, or 4 percent, to settle at 18. 115 dollars per ounce. July platinum fell steeply by 84.8 dollars, or 5 percent to close at 1,605.7 dollars an ounce.



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