Bloomberg News

Gold May Decline in New York as Stronger Dollar Cuts Demand

June 20, 2011

June 20 (Bloomberg) -- Gold may fall for the first time in five days in New York as a stronger dollar curbs demand for the metal as an alternative investment.

The dollar gained against six major currencies after European governments failed to agree on releasing a loan payment to spare Greece from default, ramping up pressure on Prime Minister George Papandreou to first deliver budget cuts in the face of domestic opposition. Gold is trading 2.5 percent below a record set last month.

A stronger dollar “has an impact on the market,” said Afshin Nabavi, a senior vice president at MKS Finance SA, a bullion refiner in Geneva. “If prices come off below $1,530 an ounce, there should be some interest from the physical market. People are very worried about the Greece story.”

Gold for August delivery fell $1.10, or 0.1 percent, to $1,538 an ounce by 8:07 a.m. on the Comex in New York. Immediate-delivery gold was 0.2 percent lower at $1,537.10 in London.

Papandreou kicked off a three-day debate yesterday on a confidence motion in his government. Greece needs parliamentary approval of a 78 billion-euro ($111 billion) package of budget cuts to ensure the payment of a fifth loan under last year’s 110 billion-euro bailout.

Euro-area finance ministers today pushed Greece to pass laws to cut the deficit and sell state assets, and left open whether the country will get the full 12 billion euros promised for next month.

‘Bated’ Breath

“Uncertainty is keeping gold well supported at the moment,” Darren Heathcote, head of trading at Investec Bank (Australia) Ltd., said by phone. “The market’s waiting with bated breath to see what comes out of the European discussions on Greece.”

Gold is up 8.2 percent in 2011 after climbing the past 10 years, the longest run of gains in at least nine decades in London. Europe’s debt crisis helped bullion reach a record $1,577.40 on May 2. The metal climbed to an all-time high of 954.8418 British pounds an ounce today.

Silver for July delivery declined 1 percent to $35.395 an ounce in New York. Palladium for September delivery slipped 1.2 percent to $736.25 an ounce, after falling earlier today to $733.10, the lowest price since May 24. Platinum for July delivery slid 1.2 percent to $1,731.10 an ounce, the lowest price since March 28.

Palladium held in exchange-traded products declined 0.24 metric ton to 65.75 tons on June 17, the lowest level since December, according to data compiled by Bloomberg.

--With assistance from Madelene Pearson in Mumbai. Editors: Sharon Lindores, John Deane

To contact the reporters for this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Phoebe Sedgman in Wellington at psedgman2@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net


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