Gold falls as Greece batters global markets

Wed May 16, 2012 8:26am EDT
 
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By Amanda Cooper

LONDON (Reuters) - Gold fell for a fourth straight day to its lowest since late December on Wednesday, sucked into a broad-based sell-off that dented global markets on the back of alarm over political turmoil in Greece.

Gold dropped along with other more industrial commodities such as copper and crude oil, under pressure from the rise of the dollar, which put silver on track for its longest stretch of consecutive daily losses in nearly four years.

Fears a Greek exit from the euro zone would worsen the European debt crisis gripped financial markets on Wednesday, sending shares and other riskier assets lower as investors shifted funds into safe havens like the U.S. dollar.

The euro touched four-month lows against the dollar, Spanish and Italian bond yields soared, while European equities hit their lowest level for the year. <MKTS/GLOB>

Spot gold fell 0.3 percent to $1,538.81 an ounce by 1200 GMT, having dropped by nearly 4.0 percent in the last four days. The price was set for its longest stretch of consecutive losses in nearly five months.

"It's difficult to see a turnaround just yet. There will be one, but I don't think this is the time, just when we are in the eye of the storm," Societe Generale analyst Robin Bhar said.

"Clearly, with people staring into the abyss, it could (fall) $50 or even $100 lower as it washes out. That is the unpredictability of it all and as equities fall, as the Greeks take money out of the banks and the banking sector collapses, I suppose you'd have to be wary of further price falls just to cover for losses in other markets," he said.

Gold tends to trade inversely to the dollar, so that strength in the U.S. unit encourages non-U.S. investors to sell their gold in exchange for greater profits in their own currencies.   Continued...

 
Gold bars are displayed at a gold jewellery shop in the northern Indian city of Chandigarh May 8, 2012. REUTERS/Ajay Verma