Gold slides as fresh European concerns spark profit taking

Gold prices fell in Asian trading on Monday as talk that France and Germany are at odds as to when the currency zone should centralize banking supervision sent the precious metal falling amid profit taking. Gold last week rose to a few dollars shy of 2012's record-high price of USD1,792.15 hit on Feb. 29 on talk of a Spanish bailout as well on the coattails of central bank decisions around the world to stimulate their economies with monetary easing measures. On the Comex division of the New York Mercantile Exchange, gold futures for December delivery were down 0.53% at USD1,768.65 a troy ounce, up from a session low of USD1,768.25 and down from a high of USD1,772.55 a troy ounce early during the session. Gold futures were likely to test support at USD1,755.75 a troy ounce, Thursday's low, and resistance at USD1,787.55, Friday's high. Over the weekend, reports surfaced that Germany and France were at odds over a timeframe to centralize banking supervision, with Germany hoping to delay giving the European Central Bank more power to oversee the eurozone's financial institutions. The news sent gold falling as investors took up long dollar positions on expectations that fresh policy snags that could further delay Europe's exit from its debt crisis. Gold and the dollar trade inversely from one another. Gold has risen in recent weeks on the Federal Reserve's decision to roll out a third round of bond purchases from banks, a monetary policy tool known as quantitative easing. The European Central Bank and the Bank of Japan have unveiled similar monetary policy tools to jolt their respective economies. Stimulus tools tend to weaken paper currencies, the dollar especially, and make gold an attractive hedge. Gold also saw support last week after The Financial Times reported that Spain is moving closer to requesting a sovereign bailout and is currently working out the terms with European Union policymakers. A bailout would allow the European Central Bank to step in and buy Spanish sovereign debt, which would lower borrowing costs in the large European economy. Yields on Spanish 10-year bonds this year have repeatedly soared above the 7% threshold considered unsustainable by the markets. However, the dollar saw support after Germany’s Finance Minister Wolfgang Schaeuble said that Spain did not need a sovereign bailout, as a rescue package already arranged for the country's banks is moving Spain closer to regaining confidence in its financial markets. Elsewhere on the Comex, silver for December delivery was down 0.86% and trading at USD34.340 a troy ounce, while copper for December delivery was down 0.19% and trading at USD3.764 a pound.

Courtesy: ForexPros