Speculation that Greece may fail to secure more financial aid from the European Union spooked investors, driving up demand for safe haven assets. However, gold edged lower as traders were opting for the US dollar over the yellow metal for wealth protection.
The situation in Greece has taken a turn for the worse after Nout Wellink, member of the European Central Bank Governing Council, told a Dutch newspaper that Europe’s bailout fund should be doubled to €1.5 trillion.
In his interview with Het Financieele Dagblad, Wellink said this would be necessary to cover the risk of contagion for other debt laden euro zone members Ireland and Portugal.
As a result, the euro fell sharply against the US dollar, making the greenback a more attractive asset than gold.
Today’s US jobs data came in better than expected, providing more support to the US dollar.
The report from the US Labor Department showed that initial applications for unemployment benefits dropped 16,000 to 414,000 last week after unexpectedly rising the week before.
Gold traded at US$1,525/oz in late afternoon London time. Silver and platinum moved in the same direction, slipping to US$35.40/oz and US$1,754/oz respectively.
Mining stocks turned negative today. Lonmin (LON:LMI) was among the heaviest fallers, sliding 3.5 percent in early afternoon trade in London. Fresnillo (LON:FRES) and Randgold Resources (LON:RRS) lost 2 percent and 1.3 percent respectively.
In the FTSE 250, Aquarius Platinum (LON:AQP) dropped 4.3 percent in early afternoon, while Petropavlovsk (LON:POG) slipped 3.2 percent and African Barrick Gold (LON:ABG) dipped 2.5 percent.