Monday, 27 June 2011 00:00
by Frank Tang
Gold Falls as Safe-Haven Bids Ease
New York (Reuters) - Gold fell for a third session on Monday, weighed down by economic optimism as investors bet debt-laden Greece would take action needed to avoid a default, pressuring safe-haven demand.
Gold's response to Greece's debt crisis has so far been erratic. Last week, the metal notched its worst performance in eight weeks as fears of economic slowdown pressured bullion prices along with other risk markets such as equities. In the past, gold tended to benefit as a safe haven in times of economic uncertainty.
"A possible solution to the Greece debt situation ... may dampen the need for safe-haven buying as the euro rebounded and currencies are less volatile," said George Gero, vice president of RBC Capital Markets. "Investors are buying stocks as they were more appealing."
Spot gold was down 0.3 percent at $1,495.55 an ounce at 3:26 p.m. EDT. U.S. gold futures for August delivery settled down $4.50 an ounce at $1,496.40, after trading between $1,490.80 and $1,506.10.
Silver was down 2 percent at $33.58 an ounce, reflecting losses in other industrial metals.
Wall Street rebounded more than 1 percent, led by banks after global banking regulators in Basel announced global capital rules that investors viewed as less onerous than previously expected.
Safe-haven buying also eased as political talks to avoid a damaging debt default resumed on Monday, RBC's Gero said.
President Barack Obama is confident Democrats and Republicans can cut a "significant deal" to trim the deficit and to work toward an agreement to raise the debt ceiling, the White House said.
Gold fell as low as $1,490.90 an ounce in early trade as oil and industrial metals extended last week's hefty drop. Despite the recent retreat in prices, gold was still one of the best performing commodities in the second quarter, rising 4 percent while most other goods dropped in price.
DOLLAR STRENGTH IN FOCUS
With less than a week until the end of the Federal Reserve's second quantitative easing program, bullion's 3 percent fall over the past two days has raised questions about whether it's years-long boom has stalled. After reaching a high of $1,575.79 on May 2, gold has struggled.
It also remains uncertain if gold could benefit from further European debt woes should investors shun risky investments and buy the Treasuries.
The dollar gained around 1 percent last week versus the euro on worries that Greece's parliament will not approve a package of austerity measures. The U.S. currency also strengthened after the Federal Reserve last week offered no hope for additional monetary support.
On Monday, the euro, however, rose against the greenback as investors bet Greece's parliament would approve a fiscal austerity package needed for the country to receive emergency aid and avoid defaulting on its debt.
Some of the investment industry's heavyweights said Greece's debt crisis could be the beginning of a bigger structural problem.
Deutsche Bank's (DBKGn.DE) CEO described the situation in Greece as critical and warned contagion to other euro zone members could lead to a crisis bigger than the one sparked by the collapse of Lehman Brothers.
On Sunday, billionaire investor George Soros thinks a country will eventually exit the euro zone and urged policymakers on Sunday to come up with a "plan B" that could rescue the European Union from looming economic collapse.
Among platinum group metals, platinum was down 0.1 at $1,671.49 an ounce, and palladium was down 0.3 percent at $724.72.
(Additional reporting by Jan Harvey in London; Editing by Lisa Shumaker)