Gold slips in line with euro ahead of EU meeting

Wed May 23, 2012 7:52am EDT
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By Jan Harvey

LONDON (Reuters) - Gold prices fell, coming under pressure as concerns that a European Union meeting later on Wednesday would fail to significantly ease worries over the euro zone debt crisis lifted the dollar to a 21-month high against the euro.

The dollar, along with German bond futures, benefited from a flight from riskier assets, including stocks and commodities such as copper and oil.

Spot gold was down 0.5 percent at $1,560.99 an ounce at 7:28 a.m. EDT (1128 GMT) while U.S. gold futures for June delivery were down $15.70 an ounce at $1,556.00.

"Gold is acting more as a risky asset, and everything is tumbling this morning ahead of this informal finance ministers meeting, where nothing good is really expected," Societe Generale analyst Robin Bhar said.

"It is not inconceivable that the meeting could surprise, but going on track records, it's very doubtful," he added.

"As we saw post-Lehman Brothers and on lots of occasions subsequently, gold can underperform in these periods of risk aversion. And it's only later that you tend to get some of the medium- to longer-term buyers coming back into the market. For now, there's just too much uncertainty."

The informal European leaders summit set for Wednesday is expected to discuss growth-boosting proposals and the idea of a joint euro-zone bond. French President Francois Hollande supports the bond plan but German Chancellor Angela Merkel is opposed.

Concerns over the prospect of debt-laden Greece exiting the euro zone to avoid unpopular austerity measures have grown ahead of an election there on June 17 which could hasten its departure from the bloc if voters back anti-bailout parties.   Continued...

Jewellery is displayed at a shop that buys gold in the Ginza district of Tokyo August 23, 2011. REUTERS/Toru Hanai