Forex Pros - Gold futures retreated from a two-week high on Monday, as mounting concerns over the euro zone's sovereign debt crisis weighed on the euro and boosted the dollar index to a seven-week high.
On the Comex division of the New York Mercantile Exchange, gold futures for August delivery traded at USD1,508.85 a troy ounce during late Asian trade, dipping 0.25%.
Ratings agency Fitch downgraded Greece's credit ratings by three notches on Friday, while Standard & Poor's said Italy' rating was at risk of a downgrade.
News that Spanish Prime Minister Jose Luis Rodriguez Zapatero led his Socialist party to its worst defeat in more than 30 years in local elections over the weekend raised concerns about how the country will address its debt problems.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.67% to hit 76.30, after earlier rising to a seven-week high of 76.33.
A stronger dollar saps demand for raw materials as an alternative investment and makes metals priced in the currency more expensive in terms of other monies.
Global financial service provider Deutsche Bank said that escalating concerns over Europe's debt crisis would result in a strengthening U.S. dollar, which would limit gains in gold prices.
"It is a bit of a double-edged sword, because in theory any debt, any currency woes should play into gold's strength. But on the other hand if the euro is pummeled and the dollar strengthens, they offset each other."
The lender projected gold prices would average USD1,460 in the third quarter of 2011, down from a previous estimate of USD1,510.
Elsewhere, silver for July delivery slumped 0.9% to trade at USD34.73 a troy ounce during late Asian trade, while copper for July delivery tumbled 2.1% to trade at USD4.019 a pound.