Gold fell early on Tuesday after the failure of Greek politicians to form a government sent the single European currency to four-month lows and unnerved investors over the profitability of holding euro-denominated assets. In the precious metals market, spot gold was down 0.1 percent at $1,555.69 an ounce and earlier hit its lowest since December 30 at $1,547.99. It is down nearly 7 percent so far in May.
US gold futures for June delivery were down $8.70 an ounce at $1,552.10. Gold earlier hit its lowest since December 30 at $1,547.99 an ounce and is down nearly 7 percent in May so far, on track for its worst monthly performance since December and a fourth monthly loss, as talk that Greece could exit the euro zone spooked investors.
While concerns over euro zone debt prompted investors to buy gold as a haven from risk in 2011, it has moved in line with other commodities this year, wilting under pressure from the stronger dollar. "The market has not given up on gold completely, but it certainly is tired, it is completely oversold, it needs a breather and to consolidate but ... people are sceptical about the upside and gold has been completely caught up in macro selling," Andrey Kryuchenkov, VTB Capital analyst, said.
Analysts said any bounce in the euro could run out of steam above $1.2880-$1.2900, with peripheral bond yields still at elevated levels, highlighting the risk of contagion from the Greek deadlock spreading to other euro zone countries. "(Gold's) safe haven status has been tarnished," Richcomm Global Services senior analyst Pradeep Unni said. "It will wobble on the euro's weakness, but in a very short term, bargain hunting and pent-up demand will emerge taking it higher."
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