Safe haven demand fades to push down gold as Euro debt worries fade

Gold prices were in decline today as safe haven demand was weakened by a surge in equity markets, driven by last week’s US consumer sentiment figures and today’s EU industrial output data, which showed a 0.8% month on month and 9.5% year on year jump, which was better than forecast and marked the largest increase since 1991.
The Dow Jones and S&P 500 indexes and the technology heavy NASDAQ composite all added more than 1% in the US on Friday, while the UK’s FTSE 100 rose 0.7% today. The Dow Jones index is currently projected to open 0.6% higher.
Worries over the European debt crisis have calmed since no updates have been released after markets were alarmed by the Hungarian government, which said the country’s budget deficit was worse than thought and it could soon find itself in the same situation as Greece, which barely avoided bankruptcy and had to accept a massive €110 billion bailout from the EU and the International Monetary Fund (IMF).

Gold has traditionally been seen as an alternative investment to the US dollar and usually moves inversely to the greenback and in tandem with the euro. However, gold has increasingly been used as a hedge against risks associated with recent volatility in equity and currency markets.

Meanwhile, Swiss bank UBS has forecast that gold will hit US$1,500/oz this year as Europe’s debt woes will continue driving safe-haven demand.
Gold slid to US$1,223/oz, while other precious metals advanced with silver and platinum rising to US$18.41/oz and US$1,551/oz respectively.

http://www.proactiveinvestors.co.uk/companies/news/17632/safe-haven-demand-fades-to-push-down-gold-as-euro-debt-worries-fade-17632.html