Gold for June delivery was reversing earlier gains and was slipping $8.60 to $1,174.70 an ounce at the Comex division of the New York Mercantile Exchange. The gold price today has traded as high as $1,192.80 and as low as $1,168.20 on high volume. The U.S. dollar index hit a one-year high and was adding 1% to $83.19 while the euro sank 1.24% versus the dollar. The spot gold price was down more than $7, according to Kitco's gold index.
Investors were seeking the safety of the U.S. dollar as they stayed skeptical about Greece's financial aid package. The steep price tag of 110 billion euros has many analysts speculating that the European Central Bank will slash interest rates and have to print more money to cover Greece's debt, which could trigger inflation. Gold had been enjoying a run to $1,200 because as paper currencies lose value, physical gold becomes more appealing as money that retains its worth. However, massive profit taking dragged on gold prices tempering its upside.
Markets are now panicked over Spain's debt. There were rumors that Fitch could slash its rating for the country. If the threat of sovereign debt default spreads throughout the "PIIGS" countries -- Portugal, Ireland, Italy, Greece and Spain -- the euro will come under even more pressure, and gold prices will pop.Currently, gold prices haven't seen the $1,200 level since December 2009. If buying is strong through the $1,200 level, then gold prices could test its all time high of $1,227 an ounce, but lackluster buying could signal another correction. Gold prices have retreated in New York as the U.S. dollar rallied. A stronger dollar means gold is more expensive to buy in other currencies. Some analysts are anticipating that bargain hunting will support high gold prices as they re-test the $1,160 area "Both