US MIDDAY: gold off highs

Gold rose early on Monday on fear that the European debt crisis could spill into Italy, but risk-averse selling across asset classes dragged bullion prices sharply off their session highs. Silver fell 2 percent, taking a beating along with other industrial commodities, as investors dumped equities and opted for the dollar and US Treasuries.
The dollar index gained 1 percent, while the S&P 500 was down more than 1.5 percent. Bullion initially rallied as a safe haven, but deepening losses in US equities and the euro pressured the metal along with other risk assets. A failure to breach key resistance at $1,560 an ounce also triggered technical selling in gold.
"It's all related to Europe at this point in time. With the equity market under pressure, you are seeing a risk-averse mentality, and that has a tendency to lead across the financial markets including gold as well," said David Meger, director of metals trading of broker/dealer Vision Financial Markets. Spot gold was up 0.3 percent at $1,547.76 an ounce by 11:53 am EDT (1553 GMT). Earlier in the session, it hit a high of $1,556.59, near a two-month high.
-- Despite a sharp intraday reversal, the metal is on track for its sixth consecutive daily gain.
-- Gold set a record at $1,575.79 an ounce on May 2.
-- US gold August futures were up 6.70 at $1,548.40 an ounce.
-- Spot silver fell 2 percent to $35.94 an ounce.
-- EU finance officials discussed options for resolving Greece's intractable debt crisis on Monday, galvanised by the growing threat of contagion to Italy, the euro zone's third-largest economy.
-- A lack of investor confidence in the eurozone lifted the price of bullion priced in euros and sterling to record highs earlier on Monday. Euro-denominated gold hit record highs above 1,110.48 euros an ounce, while sterling-priced gold rose for a sixth day to a record 979.89 pounds an ounce.
"If we start to see more pressure on Italy, such as talk of debt default, gold will look to test the previous high," said Darren Heathcote, head of trading at Investec Australia. The euro fell over 1 percent versus the dollar and hit a record low against the Swiss franc as policy-makers tried to come up with a plan for a second round of Greek aid.