Gold fell on Tuesday under the weight of a weaker euro, as investors bet against a meeting of European leaders this week doing much to tackle the region's debt crisis, while platinum shrugged off news of a fresh production outage in South Africa. The euro remained clear of last week's four-month lows but was stuck in negative territory against the dollar as worries about Greek politics and Spanish banking problems kept the currency under pressure.
Spot gold was down 0.8 percent at $1,580.16 an ounce by 1355 GMT, while US gold futures for June delivery were down $9.50 an ounce at $1,579.20. Gold is little better than flat on the year, having heavily pared early gains in line with the euro. The weakness in the single currency that has resulted from the euro zone debt crisis is for now outweighing any positive safe-haven demand.
"We have had periods in the past when the dollar was strengthening and gold was as well," Citigroup analyst David Wilson said. "At the moment gold isn't really behaving like that - everyone wants to hold the dollar and US Treasuries rather than anything else." France's Francois Hollande will push a proposal for mutualising European debt at an informal summit of EU leaders in Brussels this week, increasing pressure on German Chancellor Angela Merkel to drop her opposition to the idea.
The new French president raised the idea of bonds jointly underwritten by all euro zone member states during G8 talks at the weekend and intends to raise it again when EU leaders meet on May 23, even if it goes against Merkel's wishes. Gold tends to trade together with the euro, so any weakness in the single European currency can lead to investors in the region cashing in on their bullion positions to realise a higher profit in their local currency.
Looking at the likely course of the gold price this week, options on June COMEX futures that expire on Thursday show investors are divided on the gold's chances of breaking and staying above $1,600 an ounce. Platinum offered little response to news that Impala Platinum, the world's second-largest platinum producer, was losing 3,000 ounces of output a day as most workers were not reporting for duty at its Rustenburg mine.
The mine, shut for six weeks earlier this year because of a power struggle between unions, has been hit by fresh clashes between the dominant National Union of Mineworkers (NUM) and the Association of Mineworkers and Construction Union (AMCU). The platinum price, which rose by as much as 24 percent on the year because of the strike that spanned February and March, traded down 0.5 percent on the day at $1,452.75 an ounce.
The impact of the euro zone debt crisis on the European car market, where platinum is used extensively in catalytic converters for diesel vehicles, has prompted speculators in US platinum futures to cut their holdings to their lowest level in 2-1/2 years in the last three months. Holdings of platinum in exchange-traded products are also down since hitting a record 1.398 million ounces in March, to a near four-month low at 1.323 million ounces.
Yet platinum remains the best-performing precious metal of 2012, with a gain of 4.5 percent, compared with a rise of 1.1 percent in gold and a loss of 6.3 percent in palladium. Palladium was down 0.1 percent on the day at $608.97 an ounce, and silver down 0.7 percent at $28.28 an ounce.
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