Gold prices dropped today as the US dollar surged against other major currencies, making it a more attractive option for traders looking to protect wealth.
There is a lingering concern in the market that gold has been overbought as the yellow metal has failed to find support to stay at the US$1,550/oz level despite strong safe haven demand amid Greece’s debt problems and weak macroeconomic data that has been coming out of the US over the recent weeks.
It is feared that Greece will fail to secure more financial aid and restructure its debt, which would be seen as a technical default. The cost of encuring Greece's debt hit new all time highs today, also driving up credit default swaps for other troubled euro zone members Portugal and Ireland.
Traders are now selling gold to take profits and cover up losses in equity markets, choosing the US dollar for wealth protection. The greenback got a boost from last week’s US balance of trade data, which showed that the trade gap unexpectedly narrowed to US$43.68 billion as US exports surged to record highs.
Gold last traded at US$1,526/oz. Silver and platinum dropped to US$35.61/oz and US$1,813/oz respectively.
Mining stocks weren’t very active today. Lonmin (LON:LMI) added nearly 1 percent.
FTSE 250 constituent Hochschild Mining (LON:HOC) slipped 1.6 percent.
South America focused mining explorer Patagonia Gold (LON:PGD) were among the leaders in the sector, up 11 percent.