Gold holds steady but dollar, stocks weigh on mood

Spot gold held steady around $1,550 (Dh5,688.5) yesterday, as investors fled from risky assets on fears of a spreading Eurozone debt crisis, but a stronger dollar and weak equities weighed on sentiment. Eurozone finance ministers promised cheaper loans, longer maturities and a more flexible rescue fund on Monday to help Greece and other EU debtors in a bid to stop financial contagion engulfing Italy and Spain. Ministers from the 17 countries that share the European currency on Monday also vowed to safeguard stability in the euro area and promised new measures "shortly", but set no deadline. "We'll probably see a lot of support for gold from rising risk aversion due to concerns of escalating debt in Europe," said Natalie Robertson, a commodities analyst at ANZ. Article continues below "Although the rising dollar could pare back some of the interest in gold." The dollar hit its highest against a basket of currencies in more than three months, as the euro sank to a four-month low against the greenback after comments from the new IMF head added to uncertainties about Greece's debt crisis. The International Monetary Fund is not yet ready to discuss conditions or terms of a second Greek bailout, the fund's new managing director, Christine Lagarde, said on Monday, adding that Italian economic growth had to improve, in addition to fiscal consolidation, to restore confidence. Spot gold edged down 0.2 per cent at $1,549.90 per ounce by 0556 GMT, off $1,556.59 hit in the previous session — its highest since June 22. Gold priced in sterling and euro both hit record highs. China, the world's largest gold producer, said its gold output in the first five months of the year grew 3.67 per cent from a year earlier to 132.02 tonnes.