US gold fell as much as 2 per cent today, as growing fears over the stability of Italy and the euro zone sank riskier assets and led to liquidation on the gold market.
The sharp falls in equities and commodities forced some investors to sell their profitable gold positions to cover losses elsewhere.
The MSCI Asia Pacific Index sank 3 per cent at 3:04pm in Tokyo. Standard and Poor's 500 futures were little changed after the US index slumped 3.7 percent yesterday.
Italian borrowing costs reached breaking point on yesterday after Prime Minister Silvio Berlusconi's insistence on elections instead of an interim government threatened prolonged instability and kindled fears of a split in the euro zone.
But gold's allure as a safe haven is likely to cushion the price fall, with investors seeking to store their value in assets such as bullion and the US dollar during times of economic and political turmoil.
"The relatively modest reduction in gold compared to other commodities is encouraging," said Nick Trevethan, senior commodities strategist at ANZ.
"Given the concerns about Europe, we may see people going back to gold. I don't necessarily think we'll see record highs in the next few weeks, but we could see some cautious gains."
Trading activities on the physical market in Asia were muted, as market participants waited on the sidelines amid uncertainty over the unfolding euro zone debt crisis.
The euro today extended hefty losses sustained the day before after Italian borrowing costs spiked, while the dollar index traded little changed.
Reuters
