Gold declines sharply as pessimism dominates the market after the EU summit

With the start of another week, gold slumped sharply after the opening in Asia, where pessimism is dominating the market after investors weighed the European Summit negatively, despite the new deals reached, where the summit didn't meet market speculation over the European Central Bank role in fighting back the crisis as investors demanded leaders to allow the bank to buy European indebted bonds, yet Draghi after the rate decision last Thursday reassured that the European treaty doesn't allow the bank to finance governments.

Gold opened this week in Asia at $1712.60 per ounce, and recorded the highest at $1714.67 and the lowest at $1678.76, and is currently hovering around $1682.24 per ounce, extending the losses recorded in the past session. Our short-term outlook for metals is bearish.

The U.S. dollar gained the most against the euro, which is currently trading around $1.3300, where market jitters and debt woes forced investors to seek lower yielding investments in order to avert risk, which in result forced downside pressures on other commodities, metals and high yielding currencies and finally sent the shiny metal to the downside as investors had to liquidate their gold positions in order to cover some of the huge losses seen across the board in Europe and in the entire globe.

The sentiment deteriorated after the European Central Bank rate decision last Thursday, where despite the key rates cut by a quarter percentage point and the new monetary easing provided for banks in terms of three-year loans, pessimism spread in the market as the ECB President, Mario Draghi said the Bank is not allowed to participate in any monetary financing for governments as mentioned in the European Union treaty and the bank doesn't want to breach rules on monetary financing.

Fears spread in the market after the ECB rate decision, where Italian yields gained as much as 65 bp or 65% and climbed above 7.0% again, which raised concerns that Italy will face more challenges now, while leaders did what they had to do and now we hope that European bond auctions due today and this week could run successfully and yields hopefully will fall.

Moody's the rating agency also added to concerns that some European nations could loose their credit rating, where the rating agency clarified that despite the summit deal, pressures remain evident on the European credit ranking, and the agency will review the rating of the entire union in the first quarter of next year.

Among other precious metals, silver started this week at $32.16 per ounce, and recorded the highest at $32.20 and the lowest at $31.18, and is trading in the moment at $31.32 per ounce.

Platinum also lost 1.25% or $19.0 per ounce after opening the session at $1514.00, where the metal set a high of $1519.25 and a low of $1494.00, and is currently trading around $1495.50 per ounce.