NEW YORK |
NEW YORK (Reuters) - Gold prices steadied on Monday, after the biggest one-day fall in four months in the previous session, as concerns over euro zone sovereign debt and technical buying offset a stronger dollar.The metal shrugged off a 3 percent drop on Friday as worries about euro zone debt woes and weaker U.S. Treasuries prices prompted underlying safe-haven buying. Silver fell about 1 percent but showed signs of steadying after a volatile week last week.
"Gold is stabilizing from last week's significant sell-off and liquidation plunge, and investors are just taking a pause right now to determine the next direction," said Frank McGhee, head precious metals trader of Integrated Brokerage Services.
"We had very little follow-through selling today, and the market was well bid even in the face of the stronger dollar," McGhee said.
Technical buying also helped boost U.S. December gold futures as prices found support and rebounded after briefly dipping below their 20-day moving average, McGhee said. (Click here for a technical column on spot gold: ID:N15142669)
Spot gold slipped 0.3 percent to $1,362.09 an ounce at 3:18 p.m. EST (2018 GMT). U.S. gold futures for December delivery settled up $3 at $1,368.50.
The dollar rose to a six-week high on Monday as worries about Ireland's ability to repay its debt, and concerns its problems may spread throughout the euro zone, rekindled the greenback's appeal as a safe haven.
"Beyond the short-term correction in the gold price, the environment remains very positive for the metal," said Anne-Laure Tremblay, an analyst at BNP Paribas.
"Demand for gold is broad-based and is unlikely to falter next year, notably due to low interest rates, ample liquidity, inflationary concerns (particularly in Asia), issues relating to euro zone periphery countries and a weakening dollar," Tremblay said.
A spike in the borrowing costs of peripheral euro zone members over recent weeks had raised concerns about their ability to cut debt. <GVD/EUR>
German government bond prices fell on Monday, however, as some safe-haven flows were unwound on talk that Ireland may ask the European Union for aid to manage its debt crisis.
Ireland on Sunday did not rule out the possibility that it might have to turn to Europe to deal with its debt but said that no application had been made for assistance yet.
Commerzbank analyst Eugen Weinberg said newly resurfacing worries over the stability of certain euro zone economies were "definitely helping" the metal and it explained why gold was not trading much lower.
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A stronger dollar typically weighs on gold, because it dents interest in the metal as an alternative asset and makes it more expensive for holders of other currencies.
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