Gold Prices Take Another Beating on Eurozone Growth Fears

NEW YORK ( TheStreet ) -- Gold prices continued to fall Tuesday after more evidence of a looming recession in Europe sent equities tumbling and the dollar soaring.

Gold prices fell 3.5% last week, putting in the largest one-week decline since the week of December 18. After falling Monday, the slide was accelerating Tuesday. Gold for April delivery was down $35.70 to $1,668.20 an ounce at the Comex division of the New York Mercantile Exchange. The gold price traded as high as $1,709.80 and as low as $1,663.40 an ounce, while the spot price was losing $39.30, according to Kitco's gold index.

Silver prices were sinking $1.10 to $32.59 an ounce while the U.S. dollar index was spiking 0.67% at $79.833.

The European Union's statistics office confirmed Tuesday a previous report that Europe's economy shrank in the fourth quarter, as investments pulled back by the most in three years and exports and consumer spending declined. The EU report said that the continent's gross domestic product contracted 0.3% from the third quarter. Exports dipped 0.4% after a 1.4% increase in the preceding quarter. Household spending fell 0.4%..

Meanwhile, the euro was approaching a three-week low on concerns that Greece won't be able to complete its big restructuring deal. The country's private creditors have until Thursday night to accept the burden of a bond swap needed for Greece to receive its second, € 130 billion bailout package. Those who agree to the deal could lose 53.5% of the value of any Greek bonds they own.

A default in Greece could cause more than € 1 trillion ($1.3 trillion) of damage to the region, according to Reuters.

London's FTSE closed lower by 1.65%, and Germany's DAX finished down 3.06%. In Asia, Japan's Nikkei Average finished lower by 0.6%, while Hong Kong's Hang Seng index closed down 2.2%.

"The gold market could be seeing some fresh pressure from news of lower gold flows from Hong Kong into mainland China for the month of January, especially since some traders might link that story with disappointing Chinese growth targets for 2012," said a report from R.J. O'Brien. "Another issue that is seemingly applying some pressure to gold prices is talk of further slowing in eurozone manufacturing."

Things could get worse in the coming days according to O'Brien. A slide down to $1,650 "can't be ruled out int eh coming days, especially if the macro econoimc outlook remains negative and profit taking becomes the ruling theme in the marketplace.

Mining stocks were following prices lower on Tuesday. Among the biggest losers were Great Panther Silver ( GPL), shedding 7.2% to $2.30, and First Majestic Silver ( AG), falling 6.4% to $18.12. Novagold ( NG) was losing 4.7% to $7.59 and the iShares Silver Trust ( SLV) was down 4.4% to $31.59.

-- Written by Ross Tucker in New York.

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