Gold, crude fall on euro zone crisis fears

Gold, US crude and platinum led a decline in commodities in Asia on Wednesday as the threat of a worsening euro zone debt crisis sent investors fleeing to the dollar.

Spot gold lost nearly one percent in its biggest drop in more than two weeks, while US crude fell from a 16-week high and platinum gave up 1.7 per cent to decline for a third day.

The economy of the 17-nation euro zone barely grew in the third quarter, data on Tuesday showed. European Central Bank President Mario Draghi has predicted the currency bloc will be in a mild recession by the end of the year.

"Europe still has the capacity to handle this crisis but they've got to stop dragging their feet," said Thomas Lam, the Singapore-based chief economist at OSK-DMG, a venture between OSK Holdings Bhd. and Deutsche Bank AG.

"They need to find ways to mitigate the downside risks to growth."

The euro slipped to a one-month low against the dollar as government bonds of core countries such as France came under pressure. The common currency fell to $1.3460, its lowest in more than a month, after the French bond yield spread over benchmark German bunds hit euro-era highs.

The increase in Italian yields above the 7 percent level considered unsustainable fed concern that the appointment of former EU Commissioner Mario Monti to head a new government has failed to dispel worries about the country's political and economic future.

Tokyo's Nikkei share average lost 0.7 percent, while MSCI's broadest index of Asia Pacific shares outside Japan fell 1.5 percent.

Spot gold lost 0.8 percent to $1,765.99 an ounce, although prices have climbed 24 per cent this year as they head for an 11th annual gain. US gold fell 0.9 per cent to $1,766.50. Platinum lost 1.7 per cent to $1,610.49 an ounce.

Copper for three-month delivery on the London Metal Exchange slipped 0.2 per cent to $7,672 per tonne. Prices of the industrial metal rose early on Wednesday after the U.S. economy gave some cheer to markets as retail sales increased in October and a gauge of manufacturing in New York state rose this month for the first time since May.

Brent crude slipped 55 cents to $111.63 a barrel, while U.S. oil fell a steeper 66 cents to $98.71 following a surprise build in crude stocks in the world's largest oil consumer, the United States.

"The debt crisis seems to be spreading from peripheral euro zone countries to core euro zone countries such as France," said Ben Le Brun, market analyst at OptionsXpress.

Wheat dropped almost 1 percent, falling for five out of six sessions with additional pressure coming from plentiful global supplies, which offer stiff competition to U.S. exporters and are eating into corn's share in the animal feed market.

December corn slid 0.8 per cent to $6.40-1/2 a bushel, while December wheat lost 0.6 per cent to $6.28-3/4 a bushel. Soybeans fell from a one-week high, losing almost 1 percent to $11.89-3/4 a bushel.

Follow Emirates 24|7 on Google News.