Gold prices stable with EU summit in focus

Gold prices were steady yesterday, after posting their sharpest weekly rise in more than a month, as the dollar weakened and on prospects that European Union leaders will finally come up with a firm plan to tackle the Eur-ozone debt crisis. The two-year-old debt crisis has not only pushed a few Eurozone nations to the brink of bankruptcy, but also threatened to split the single currency bloc and shake the global economy. French President Nicholas Sarkozy and German Chancellor Angela Merkel will meet to align their positions on closer fiscal integration of the region, before a European Central Bank meeting and a European Union summit later in the week. Volatility "I think politicians across the board recognise there is a huge issue here that needs sorting out. Whether Europe can deliver is still an open question," said Natixis analyst Nic Brown. "There is likely to be a fair amount of volatility on the political front this week." Spot gold slipped 0.3 per cent to $1,740.64 (Dh6,392.45) an ounce by 10.59 GMT, after rising nearly 4 per cent in the previous week. US gold edged down 0.3 per cent to $1,745.60. Gold has shed its traditional status as a safe haven from political and economic volatility in recent weeks, and has tended to move more in line with other commodities, like base metals. For instance, benchmark three-month copper on the London Metal Exchange was steady at around $7,895 per ton early yesterday. Asset class "There is still a lot of risk in Europe, and gold prices are no longer reacting to it they way they used to. Gold prices are reacting primarily to changes in the value of the dollar," Brown said. "Commodities across the board are trading as an asset class and therefore inversely related to the strength of the dollar." The dollar fell against a basket of currencies yesterday, as the euro rose on hopes for a positive outcome from Friday's EU summit. "Market hopes of progress on Europe should support gold prices for the next few days ahead of an expected ECB rate cut on Thursday," ANZ said in a note. The European Central Bank (ECB) is expected to cut its main interest rate for the second month running.