Bloomberg News

Gold May Decline in New York on Greece Debt Resolution Outlook

June 01, 2011

June 1 (Bloomberg) -- Gold may decline for a second day in New York as speculation that Greece’s debt crisis is closer to being resolved curbs demand for the metal as a protection of wealth.

Greece’s next aid package may include incentives for bondholders to roll over maturing debt without triggering a credit-rating downgrade that would roil Europe’s banking system, two people with knowledge of the talks said. The dollar was little changed against six major currencies after dropping to a three-week low. Bullion typically moves inversely to the greenback.

“Seeming progress in negotiations over a new aid package for Greece keeps gold trapped below $1,540” an ounce, Edel Tully, a London-based analyst at UBS AG in London, said today in a report. “Dollar weakness and Moody’s having put Japan’s sovereign rating on review for a possible downgrade underpins gold.”

Gold for August delivery fell $2.40, or 0.2 percent, to $1,534.40 an ounce by 8 a.m. on the Comex in New York. The metal yesterday reached $1,541.90, the highest level since May 4, and ended the month down 1.3 percent. Immediate-delivery gold was 0.1 percent lower at $1,533.50 in London.

Bullion fell to $1,532.25 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,536.50 at yesterday’s afternoon fixing.

Gold’s Record

Concern about faster inflation, Europe’s debt crisis, a weakening dollar and fighting in Libya boosted gold futures to a record $1,577.40 on May 2. Prices are up 7.9 percent in 2011 after climbing the past 10 years, the longest run of gains in at least nine decades in London. Japan’s debt rating was put on review for a downgrade by Moody’s Investors Service yesterday.

Saddled with Europe’s heaviest debt load, Greece is seeking additional loans after last year’s 110 billion-euro ($158 billion) European-led package was insufficient to plug its fiscal hole. Luxembourg Prime Minister Jean-Claude Juncker said May 30 that the euro region’s leaders will decide on a new aid package by the end of June and have ruled out a “total restructuring” of Greece’s debt.

“Some investors are emboldened by signs that Greece will get a bailout and avoid default, and are selling their gold,” said Hwang Il Doo, a Seoul-based senior trader at KEB Futures Co. “Minor losses are inevitable for gold to extend its bull run.”

Silver for July delivery fell 0.7 percent to $38.045 an ounce in New York. Prices dropped 21 percent in May, the most since August 2008, as CME Group Inc., the Comex owner, raised margin costs to curb price volatility.

The U.S. Mint sold 3.65 million ounces of American Eagle silver coins last month, up 30 percent from April, its website shows, taking the total for the year so far to 18.9 million ounces. That compares with 15.2 million ounces in the first five months of last year and is the best January through May period since at least 1986, according to data going back to that year. American Eagle gold coin sales fell 0.9 percent to 107,000 ounces last month.

Palladium for September delivery was little changed at $781.50 an ounce. Platinum for July delivery was 0.2 percent lower at $1,830.80 an ounce.

--Editors: John Deane, John Viljoen

To contact the reporters on this story: Nicholas Larkin in London at; Kyoungwha Kim in Singapore at

To contact the editor responsible for this story: Claudia Carpenter at

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