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Gold posts weekly loss as EU jitters boost US dollar

Last updated: 14:39 10 Dec 2011 GMT, First published: 15:39 10 Dec 2011 GMT

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Gold was in decline this week as investors opted for the US dollar, which is seen as an alternative investment to the yellow metal, to protect wealth amid economic uncertainty.

Demand for the American currency was boosted by the disappointing results of Friday’s EU summit, which failed to produce an EU-wide treaty to tighten fiscal discipline.

Following extensive talks with French President Nicolas Sarkozy, British Prime Minister David Cameron used his veto power to block changes to the EU treaty, which he said failed to protect British interest.

Aside from the UK, Hungary, Czech Republic and Sweden refused to back a new EU treaty.

As a result, 23 EU members including all of the 17 euro zone nations were left to negotiate an intergovernmental agreement to put limits on budget deficit and penalise countries that breach deficit targets.

The 23 countries also agreed to provide €200 billion to the International Monetary Union (IMF), one of the main contributors to debt packages for struggling European economies.

Demand for gold faced more pressure from this week’s Chinese consumer prices data, which dampened the metal’s appeal as an inflation hedge.

The figures showed a decline in the rate of growth in consumer prices from 5.5 percent in October to 4.2 percent in November.

Gold ended the week at US$1,711/oz, down US$34 from a week ago. Silver dropped from US$32.64/oz to US$32.23/oz and platinum fell from US$1,543/oz to US$1,513/oz.

Randgold Resources (LON:RRS) jumped from 6,700 pence to 6,870 pence over the past five days of trading, while most other majors were in decline this week.

Silver miner Fresnillo (LON:FRES) advanced from 1,753 pence to 1,769 pence, while platinum producer Lonmin (LON:LMI) slipped from 1,063 pence to 1,022 pence.

In the FTSE 250, African Barrick Gold (LON:ABG) fell from 515 pence to 509 pence.

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