Gold fluctuates heavily, the focus remains on Europe

Gold fluctuated heavily today after the huge losses recorded yesterday, where the mixed sentiment in Europe and the mixed U.S. dollar have forced downside pressures on gold to trade lower despite rising fears and jitters, where the metal is loosing attractiveness as a safe haven after CME raised margin requirements several times during the past month to control the rapid incline the metal witnessed.

Gold opened the session today at $1623.62 per ounce, and fluctuated heavily to set the highest at $1634.55 and the lowest at $1616.00, and is currently trading around $1616.12 per ounce. We expect volatility to control the metal's movement today; however, gold could extend further to the downside unless the mixed dollar returned to trade lower.

As always, we remind that Europe is the main focus in the market, especially when rate decisions from the European Central Bank and the Bank of England are expected tomorrow, awaiting the steps taken by the banks to solve the deepening recession with rising inflation and slowing growth.

Services sectors in major economies in Europe contracted, while manufacturing sectors are reflecting bad performance as some sectors contracted and others are very close to contraction, which indicates that the European economy as a whole is entering a recession phase.

With mixed data and sentiment, the general pessimism and the dominant jitters and debt woes in the market, the U.S. dollar gained the most and set the highest level since January. On the other hand, CME raised margin requirements on gold futures, reflecting less attractiveness for the metal, where as we can see gold turned into a normal commodity and usually moves against the dollar, where the metal's appeal as a safe haven is loosing momentum, yet gold advances on the appeal as a hedge against uncertainty and inflation.

Moody's rating agency has downgraded the Italian government bonds' rating by three notches to A2 from Aa2 on a negative outlook and rising risks for euro-area sovereigns, especially that Italy handles the largest debt in the euro zone, as Moody's explained.

The rating agency said that other European countries with lower debt rating than top Aaa are under review and could face cuts due to the current situation in Europe and the exposure to the debt crisis.

Among other precious metals, silver slumped today after opening the session at $30.04 per ounce, to set the lowest at $29.32, yet the metal fluctuated heavily and reached a high of $30.21, and is currently hovering around $29.40 per ounce.