Gold fell 1 percent on Friday after the euro slipped sharply against the dollar, coming under pressure after a euro zone government source said rating agency Standard & Poor's was planning to downgrade several countries in the bloc.
Losses were limited as traders awaited confirmation of the rumor, however, and gold remained on track for a second week of gains and its strongest two-week performance in two months.
Spot gold was down 1.1 percent at $1,631.24 an ounce at 1517 GMT, while U.S. gold futures for February delivery were down $15.30 an ounce at $1,632.50.
Gold's reaction to the spreading euro zone debt crisis has been choppy. Worries over debt helped drive prices to record highs last year even as the dollar strengthened, but in the fourth quarter it traded more in line with other commodities and against the U.S. currency despite jitters persisting.
Gold tends to be supported by mild to strong risk aversion. However, (when) risk aversion rises to very high levels, gold tends to be sold off alongside risky assets, Sovereign issues in the euro zone are clearly not over and we may see further bouts of price correction in the gold market over the coming months . For the latest updates on the stock market, visit Stock Market Today For the latest updates PRESS CTR + D or visit Stock Market news Today
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