Gold extends losses on rise in Spanish yield and global recovery concerns
Gold continued its drop for the second session reaching one-week low on concerns after the rise in Spanish bond yields and concerns regarding global recovery had enhanced the dollar, thereby reducing the appeal of the shiny metal.
Now, the focus once again is on the European debt crisis after the measures announced recently by European officials as concerns revived that the crisis is not easing after the rise in Spanish bond yield and credit default swaps last week.
Spain's 10-year bond yield leaped 19 basis points last week to 5.98% while the Italian benchmark also rose by seven basis points to 5.52%, where the worries pushed the euro to one-month low versus the U.S. dollar.
Tomorrow, Spain will sell 12- and 18-month notes, while on April 19 it will auction 2014 and 2022 bills.
In fact, the yield is coming close to levels which forced Greece, Portugal and Ireland to ask for an international bailout.
Also, the cost of insuring against Spanish default climbed to a new record on Friday as itedged upby 17 basis points to 498 as of 4:00 p.m. in London, surpassing the prior all-time high of 493.
Spanish minister urged the European Central Bank to intervene to halt the rise in cost of borrowing, while euro area officials will seek global assistance this week when they conduct talks with the IMF in Washington.
Moreover, worries regarding global recovery intensified last week after China's first-quarter GDP eased for the fifth consecutive quarter to 8.1% compared with 8.9% in the fourth quarter and with the drop seen in U.S. data.
In the FX market, the U.S. dollar surged for a second session against a basket of major currencies; the dollar index is currently hovering near 80.11 compared with the day's opening of 79.90, noting that the breach of resistance around 79.60 levels on Friday, which represents SMA level, paved the way for the rally, while remaining above 80 level may cause further advance.
Precious gold is currently trading around $1643.36 an ounce while it recorded a high of $1654.01 and a low of $1641.14.
Technically speaking, the shiny metal fell on Friday after facing tough resistance at $1675 as this level constitutes SMA 100 level, while it may find support today at $1640.
Crude oil for May's delivery is meanwhile showing a drop to trade around $102.10 a barrel after opening today's trades at $102.72.