By: Sara Patterson
A continually strong US Dollar has pushed gold prices to the lowest they’ve been in the past 7 weeks. Although leaders at last week’s EU summit agreed to a plan to build a rescue fund, the Fitch Ratings has commented that this plan did not sufficiently ease the pressure on the region’s sovereign bond ratings. Investors are flocking to the Dollar as a haven in anticipation of a ratings downgrade by Fitch Ratings or another one of the major ratings agencies.
Moody’s announced yesterday that it will review the EU’s ratings, and Fitch’s announcement did little to calm investors. Immediate-delivery gold lost 0.9%, falling to $1,650.93 an ounce, while the dollar reached a two-month high against the Euro.
At its lowest point on Monday, the Euro reached 1.3168, down 1.5%, and many market analysts are predicting that the Euro will continue to weaken considerably before it heads upwards. As risk assets sold off yesterday, the Italian 10-year headed towards the 7% level, something which is difficult for both investors and analysts to ignore.
In Asian trading, fear of an EU ratings cut also caused Asian stocks to drop and local currencies such as the Philippine peso and the Indian rupiah to fall further against the dollar.