Gold dented by euro fall after European elections
By Amanda Cooper
LONDON (Reuters) - Gold fell for a second day on Tuesday, under pressure from the slide in the euro on the back of political uncertainty in Greece and a change of president in France, while Chinese import figures did little to offset the impact of the weaker currency.
Data showing a sharp jump in exports of gold in March from Hong Kong to mainland China, soon to be the world's top bullion consumer, did little to support the price, but reinforced analyst expectations for gold to benefit in the longer term from Chinese demand.
In the shorter term, however, the decline in the euro had a greater impact on the gold price.
The correlation between the single European currency and the gold price hit its highest in four months in late April, meaning the two are more likely to move in lockstep than inversely to each other.
Spot gold was down 0.6 percent on the day at $1,628.04 an ounce by 1141 GMT. The price fell last week for a second consecutive week, losing nearly 0.9 percent.
Gold priced in euros was down around 0.4 percent on the day at 1,249.39 euros an ounce. So far this month, euro-priced gold has outperformed the dollar-equivalent, with a decline of just 0.6 percent, compared with a fall of more than 2 percent in benchmark dollar-denominated gold.
"It is a much more hazardous environment (for gold) at the moment because of the downside risks to euro/dollar," Deutsche Bank analyst Michael Lewis said.
"One of the supportive factors (is) we've already seen quite a dramatic scaling-back in speculative length in gold over the last few months, so that might reduce the positioning risk for the market, but it is definitely going to be an environment where gold is going to struggle and the correlation (of gold to the euro/dollar rate) is going to cause quite substantial headwinds," he said, adding his bank's view was for gold to maintain a range of $1,600 to $1,650 over the coming weeks. Continued...