Moneycontrol: Gold heads for biggest weekly loss since December

Gold has lost some of its safe-haven appeal after financial market turmoil caused by the prolonged debt crisis in Europe and the U.S. Federal Reserve's decision to take only a modest step to boost the economy forced investors to cash in bullion to cover losses.

Gold rose in early trade to a high of about $1,568 per ounce before slipping to $1,565.26 by 0330 GMT, hardly changed from Thursday, when it fell 2.5 percent - its biggest one-day drop since late February after the Fed stopped short of launching another round of quantitative easing.


Previous rounds of asset purchases by the Fed to drive down interest rates and stimulate the economy had weakened the U.S. dollar, boosted global stock markets and prompted investors to turn to gold as a hedge against inflation.

Gold hit a record of about $1,920 in 2011, when investors turned to the metal as a safe haven during the debt crisis in Europe. But this year, declines in other markets have caused investors to sell gold for cash, sending prices to the lowest in more than four months at $1,527 in mid-May.

Asian stock markets slipped on Friday, but the dollar held near its highest in more than a week against a basket of major currencies after a long-anticipated credit rating downgrade of the world's major banks by Moody's.


Investors awaited the release of U.S. Commodity Futures Trading Commission data later in the day for clues on investor interest in bullion.

Money managers raised their net length in gold by 1,258 lots, or about 1 percent, to 99,684 lots in the week to June 12, as signs of slowing U.S. economic recovery and the euro zone debt crisis fuelled speculation of monetary stimulus from central banks around the world. [ News Source ]

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