Last week, for second consecutive week, expectations of China and Europe easing their future monetary policies in order to stimulate their respective economies lifted the gold prices higher.
Spot prices settled to a one – month high on Thursday, reaching $1661.70, but optimism faded the next day, as reports released by France’s finance ministry on Friday said Standard & Poor’s have revised the country’s triple A rating, dealing a heavy blow to the already struggling Eurozone.
A weaker than expected bond auction in Italy (that failed to live up to the Spanish sale) also weighed on the gold price.
Pessimistic news from the struggling Eurozone pushed gold prices lower.
The decrease on Friday ended a three – day rally, as the dollar gained strength following the report from Standard and Poor’s about revising the credit ratings of 9 European countries. Lacking the safe haven characteristic, France’s downgrade saw many investors reduce holdings of gold.
Looking ahead, market players remain bullish on gold after reports showed Mainland China imported a record level of gold from Hong Kong in November. The recent spike in demand has placed China in front of India, as the largest consumer for the yellow metal.