Los Angeles, CA – Gold sank down to $1630 an ounce on Tuesday after the U.S. dollar made gains for the third straight day. These strong gains came on news from the EU Summit last Friday of tighter Eurozone fiscal responsibility measures that were not well received by investors. The price drop in Gold and other precious metals was due to Safe-Haven asset liquidation and swaps for the U.S. Dollar and U.S. Treasury Securities, both up since the breaking news out of the Euro Zone.
Gold, along with several other commodities, saw a sharp price drop as the European leaders’ summit failed to gain investor confidence in their ability to resolve their sovereign debt crisis. As a consequence, the Euro dropped down almost 2% and Gold dropped over 3% to a mid-November low. “The market was anticipating a ‘bazooka’ response, and the European meeting did not yield one,” said Scott Gardner, the chief investment officer at Verdmont Capital SA in Panama. “It appears to me to be a classic ‘risk-off’ day across markets,” James Dailey, who manages $215 million of assets at TEAM Financial Management LLC in Harrisburg, Pennsylvania, said in an e-mail. “It also looks like a deleveraging day, which has been signified in the past by gold being caught up in aggressive commodity selling.” In addition, Moody’s credit agency made a note that because last week’s European Union summit offered few new measures that the credit-ranking revision risk for many of Europe’s nations will not diminish, causing further uncertainty in the region and in the markets.
Despite this decline the outlook remains positive for the metal as gold is up over 20% since the beginning of the year. Many financial analysts believe the precious metal will remain in a bullish market into 2012. As more news unfolds out of the Eurozone, gold will look to the Federal Reserve’s rate decision later Tuesday.
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