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.
“As uncertainty mounts leading up to the June 17 Greek elections, we’re more inclined to bet on a higher gold price but a Greek exit, while most likely fuelling considerable physical gold demand in Europe, could spark a sizeable deleveraging and dis-investment in financial markets,” UBS said in a note.
“The paper gold market would not be immune to this selling. That is gold’s risk and it’s feasible to think the metal could fall below last week’s low of $1,527 before ultimately rebounding sharply.”
In India, the world’s largest gold consumer, demand stayed muted after prices in the local market rose as the rupee fell to a record low, increasing the cost of imports.
The rupee’s fall sparked mild intervention from a central bank seen by traders as reluctant to be more aggressive against the strong downtrend.
Gold scrap sales are also rising, analysts said.
“India’s scrap gold sales have picked up by 30 percent in the span of just one week as gold prices in local terms surged,” HSBC said in a note.
“The rise in gold scrap sales, if it were to continue, may mean India will require lower gold imports than would otherwise be the case. Weak bullion import demand may present headwinds to any near-term gold rally.”
Silver was down 1.1 percent at $27.79 an ounce, while spot platinum was down 0.8 percent at $1,426.75 an ounce and spot palladium down 0.5 percent at $603.25 an ounce.
Platinum matched the five-month low of $1,416.70 an ounce it fell to last week as the strong dollar and worries that demand from the European car market would remain weak offset the impact of an ongoing strike at the world’s largest platinum mine.
Impala Platinum (IMPJ.J) earlier confirmed that its flagship Rustenburg mine, where it is losing 3,000 ounces of production a day, had shut for a second day running because of the latest flare-up in a union turf struggle.
“Rivalry between the two unions was the catalyst for the last six-week work stoppage in January and February that saw over 100,000 ounces in lost platinum output,” Standard Bank said in a note.
Reporting by Jan Harvey; editing by William Hardy