By Joe Richter and Nicholas Larkin - May 10, 2012 2:43 AM GMT+0800.
Gold dropped to a four-month low as deepening political turmoil in Greece boosted the appeal of the dollar as a safe haven and curbed demand for precious metals as alternative assets. Silver fell to the lowest since January.
The euro weakened for an eighth session against the dollar as Greek politicians struggled to form a new government, raising concern that the nation may leave the currency bloc. Commodities plunged to the lowest level this year yesterday as global equities slid to a three-month low.
“Capital is going to where it’s safe, and it hasn’t been safe in gold,” Frank Lesh, a trader at FuturePath Trading in Chicago, said in a telephone interview. “Currency markets tend to rule in commodities, and right now the dollar is king.”
Gold futures for June delivery slid 0.6 percent to settle at $1,594.20 an ounce at 1:50 p.m. on the Comex in New York. Earlier, the metal touched $1,578.50, the lowest since Jan. 3.
The plunge has pared this year’s gain to 1.7 percent, after the metal advanced for 11 consecutive years. Futures reached an all-time high of $1,923.70 in September.
Holdings in bullion-backed exchange-traded products are at 2,382.4 metric tons, about 1.2 percent below the March 13 record, data compiled by Bloomberg show.
The dollar has gained 1.6 percent this month against a basket of six currencies, while the most-active gold contract has declined 4.2 percent.
“Dollar strength is trumping any safety qualities of gold at the moment,” Lesh said.
Silver futures for July delivery declined 0.7 percent to $29.241 an ounce on the Comex, after falling to $28.615, the lowest since Jan. 9.
On the New York Mercantile Exchange, palladium futures for June delivery fell 1.5 percent to close at $613.65 an ounce, after falling to a four-month low of $609. Platinum futures for July delivery dropped 0.6 percent to $1,499.20 an ounce. Platinum has gained 6.7 percent this year.