Gold to decline as pessimism spread on downgrade threats and another Greek delay

With the start of the session today, pessimism dominated the market after the downbeat announcement made by Moody's, which threatened global and local banks with a possible downgrade, reflecting negativity in the market and forcing downside pressures on precious metals to trade lower, especially when the strengthening U.S. dollar gained more momentum.

Gold shed 0.44% or $7.66 per ounce to currently trade around $1720.49 per ounce after starting the session at $1728.15 per ounce. The metal recorded so far the highest at $1729.47 and the lowest at $1717.25 per ounce.

Moreover, the sentiment deteriorated and negativity spread in the market yesterday after the Greek Finance Minister, Evangelos Venizelos, clarified that an agreement will be reached with international lenders next week, where markets started to doubt whether Greece will reach this agreement in the right time to avoid default or it will go through bankruptcy as soon as March 20, when the nation will return 14.5 billion euros of maturing debt.

The finance minister also said the Greece met the final two demands of international lenders and now the nation expects the second bailout package worth 130 billion euros in return. However, Venizelos also said that some of the euro-area members attempt to force Greece out of the euro.

The European common currency was affected sharply by the news, where the common currency retreated significantly adding more strength to the appreciating U.S. dollar as we can see investors are excessively demanding the low yielding currency as they attempt to protect their wealth by averting as much risk as possible.

Fears spread further in the market when Moody's clarified that it may downgrade the credit rating of 17 global institutions including HSBC, Goldman Sachs and Bank of America. However, the sentiment deteriorated sharply when the rating agency added that it might also cut the credit rating of 114 European financial institutions, reflecting the contagion of the debt crisis, which seems to be expanding now within the global financial sector.

With the lack of major fundamentals from Europe, investors will track any improvement in the Greek matter; however, the main focus will on fundamentals from the world's largest economy, which is to release housing data and jobless benefits figures in addition to the Philadelphia manufacturing data.

Gold is expected to continue the downside movement during the rest of the session today; however, the metal's movement depends on the sentiment in the market, where fears and rising concerns could trigger more pressures to the metal as the U.S. dollar will gain significantly on risk aversion.

Among other precious metals, silver also declined 0.67% or $0.22 per ounce after the opening of $33.45 per ounce, to currently trade around $33.23 per ounce. The metal reached so far a high of $33.51 and a low of $33.15 per ounce.

Platinum, which is still cheaper than gold, retreated by 1.68% or $27.50 per ounce to $1607.25 per ounce, recording the highest at $1635.25 and the lowest at $1607.25, noting that the metal opened the session at $1634.75 per ounce.

Palladium shed 0.20% or $1.38 per ounce so far to trade now around $681.75 per ounce after the opening of $683.13 an ounce. The metal set a high of $685.00 and a low of $681.25 per ounce.