Gold, stocks decline on ratings cut warning

Gold declined for a second day alongside equities and other commodities after Standard & Poor\'s said it may cut the credit ratings of 15 European nations as the region\'s debt crisis escalates. Gold for immediate delivery lost as much as 0.8 per cent to $1,709.07 (Dh6,278) an ounce and traded at $1,717.67 an ounce at 3.47pm in Singapore. The February-delivery contract fell 0.8 per cent to $1,721.40 an ounce on the Comex in New York. The dollar advanced. \"In the near term, gold is likely to keep the recent negative correlation with the US dollar and positive correlation with equities we\'ve been seeing,\" said Wang Yonghong, a Shanghai-based analyst at Guotai Junan Futures Co. Possible downgrades Germany, France and four other AAA-rated countries may be stripped of their top ratings, S&P said on Monday. The ratings company also put nine other European nations on review for possible downgrades, sending stocks, oil and the euro lower yesterday, while the Dollar Index advanced as much as 0.3 per cent. Article continues below Gold benefits Eurozone-based investors when it is used for diversification because of its low or negative correlation with other assets in an \"optimised portfolio context,\" the World Gold Council said yesterday, citing a study it hired New Frontier Advisors LLC to conduct. The so-called optimal allocation to gold for euro-based investors ranges from two to three per cent for low-risk portfolios, to four to nine per cent for portfolios split evenly between stocks and bonds, and ten per cent for those with assets mostly in equities, the statement said. Gold holdings in exchange-traded products fell for a third day and stood at 2,354.365 tonnes on Monday, according to data.