Eurozone worries weigh on gold prices

Gold hovered around $1,600 an ounce yesterday, as investors stayed on the sidelines in the final week of the year, subdued by lingering concerns about the Eurozone debt crisis. Recent US economic data spurred a rally in riskier assets including equities and industrial metals, and sent gold prices up about half a per cent last week. Investors will look for more signs of recovery in the US from data this week, including consumer confidence for December. "Gold prices may be under pressure from a strengthening dollar in the next few months as the brightened economic prospects in the United States are likely to further boost the dollar index," said Li Ning, an analyst at Shanghai CIFCO Futures. The dollar index traded steady yesterday, and was on course for a second straight quarter of gains, as fears about the worsening Eurozone debt crisis drove investors to seek safety in the greenback. Spot market Spot gold fell to a one-week low of $1,591.09 earlier and recovered slightly to $1,594.96 by 1225 GMT, down 0.7 per cent. US gold dropped 0.68 per cent to $1,595.30. Silver and gold speculators cut their bullish bets for the third consecutive week in the week to Dec-ember 20, with silver net long positions down by more than half, said the US Commodity Futures Trading Commission. "Although gold's outlook remains supported in the medium to long term by central banks' gold buying, among other factors, risks such as rising bond yields in Italy will send more safe haven flow to the dollar and pressure gold," said Li of Shanghai CIFCO. Support likely Prospects of slower global growth have led some central banks to loosen their monetary policies. The launch of quantitative easing by the US Federal Reserve or the European Central Bank would provide support for commodities, including gold, analysts said. The European Central Bank should launch a US-style asset purchase programme if economic conditions change, executive board member Lorenzo Bini Smaghi said. Holdings of the iShares Silver Trust SLV, the world's biggest silver-backed exchange-traded fund, declined nearly 1 per cent to 9,605.79 tonnes by December 23.