Gold falls on dollar, safe-haven status supports

By Sue Thomas

LONDON, June 13 (Reuters) – Gold fell to its lowest in more than a week on Monday as the euro eased against the dollar, but concerns about the euro zone debt crisis sustained investor interest in the precious metal as a store of value.

Bullion fell almost 1 percent on Friday, its biggest one-day decline in a month, due to a rally in the dollar and broad commodities losses.

Spot gold was bid at $1,524.49 an ounce at 1357 GMT, off a session low of $1,523.44, its lowest since June 2. That compares with $1,531.03 late in New York on Friday.

A higher U.S. currency makes metals priced in dollars more expensive for holders of other currencies.

“Currencies remain relatively volatile and will be the driver in the near term for gold and silver. The outlook for the currencies will have a significant bearing on where the next move is,” RBS analyst Daniel Major said.

Some analysts say a whole raft of factors had stacked up against gold, including an increase in scrap supply.

“A wholesale move out of oil and other commodities, equities, and the euro in turn undermined bullion prices as the dollar rallied,” HSBC said in a note.

“German insistence that private investors contribute to a second Greek government bailout injected enough uncertainty to weigh on the euro.”

 

SAFE HAVEN

Analysts say a strong catalyst will be needed for gold to break through $1,550 an ounce level and if that level is broken the next target would be the record high of $1,575.79 an ounce hit on May 2.

Strong support is seen at the psychological $1,500 an ounce.

“The Greek debt crisis will keep investors interested in gold,” a trader said.

The euro hit a lifetime low against the safe-haven Swiss franc and slipped versus the dollar, as investors worried at policymakers’ struggles over the Greek debt crisis cut their exposure to the common currency.

The cost of insuring peripheral euro zone bonds against default hit record highs on Monday.

“Continued pressure on bond yields is likely to spur fresh investor interest,” Credit Suisse said in a research note.

“The lingering discussion about the fiscal situation across developed economies should additionally promote gold’s role as a store of value,” it said.

Newmont Mining Corp, the world’s No.2 gold producer, sees prices for the precious metal rising to $1,600 this year and above that next year, on growing demand from Asia’s burgeoning middle class.

The bullion market in top consumer India was slow during the monsoon, a slack season for gold demand, but jewellers are expected to replenish stocks ahead of September, when festivals and weddings restart.

Spot silver was at $35.45 an ounce from $36.13 late on Friday, platinum was at $1,810.49 from $1,823.75 and palladium at $803.25 from $809.95. (Additional reporting by Pratima Desai and Lewa Pardomuan; editing by James Jukwey)