Gold futures pared early losses, but still settled lower Monday, on fading hopes of monetary stimulus after the Greek election outcome. Investors also reacted sharply to bond auctions in Span and Italy where yields soared to record levels, dragging down gold prices for the first time in seven days.
In Greece, the New Democracy party registered a narrow win in the parliamentary elections, ending speculations that the country may be forced to quit the eurozone.
Spain's 10-year government bond yields jumped to a euro-era high of 7.14 percent, an increase of 30 basis points. Italy's 10-year government bond auction on Monday also witnessed yields surging to 6.07 percent, an increase of 14 basis points. The exorbitant borrowing costs impacted most European stock markets, offsetting gains made after the Greek election results.
Gold for August delivery, the most actively traded contract, dropped $1.10 or 0.1 percent to close at $1,627.00 an ounce Monday on the Comex division of the New York Mercantile Exchange.
Gold traded at an intraday high of $1,631.30 an ounce and a low of $1,606.90 an ounce.
Gold gained nearly 2 percent last week, amid hopes of further quantitative easing after some weak initial jobless claims data from the U.S. and the record highs at the Spanish and Italian bond auctions.
The dollar index, which tracks the U.S. unit against six major currencies, was trading at 81.936 on Monday, up from 81.584 in North American trade late Friday. The dollar scaled a high of 82.03 intraday and a low of 81.27.
The euro traded lower against the dollar at $1.2583 on Monday, as compared to $1.2646 late Friday. The euro scaled a high of $1.2747 intraday and a low of 1.2290.
In economic news, the National Association of Home Builders said the NAHB/Wells Fargo Housing Market Index crept up to 29 in June from a downwardly revised 28 in May. Economists expected the index to come in unchanged compared to the 29 originally reported for the previous month. The index rose to its highest level since coming in at 30 in May of 2007.
From the eurozone, bad loans at Spanish banks increased to an 18-year high in April, Bank of Spain said Monday. Around 8.72 percent of the loans held by banks were unpaid for more than three months, up from 8.37 percent in March. The ratio was the highest since April 1994. Doubtful debt rose by 4.77 billion euros to 152.74 billion euros in April.
The property market crash as well as Spain's record high unemployment rate in the euro area raised banks' bad loans. The European Central Bank's net lending to Spanish banks surged to an all-time high of 287.8 billion euro in May from 263.5 billion euro in April.
by RTT Staff Writer
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