Gold futures fell for a third consecutive session as investors turned to the U.S. dollar and shed perceived risky assets on worries that political gridlock threatened the euro zone's progress in combating its sovereign-debt crisis.
The most actively traded gold contract, for June delivery, recently traded down $16.80, or 1.1%, at $1,587.70 a troy ounce on the Comex division of the New York Mercantile Exchange. Futures fell as low as $1,578.50 a troy ounce, the lowest intraday price since Jan. 3.
Gold's declines tracked moves in currency markets, as the euro sank against the U.S. dollar for a second day in response to concerns about Greece's struggles to form a coalition government as well as the left-leaning challenger's victory in France's presidential election. In Spain, the benchmark stock index slumped on Wednesday to the lowest level in more than three years on worries about the country's fragile banking sector.
"The lack of confidence and a persistently strong dollar continues to plague the precious metals," Standard Bank analyst Marc Ground said in a note.
The ICE U.S. Dollar Index, which tracks the currency against those of some major U.S. trading partners, on Wednesday touched the highest point since mid-March. A rising dollar can hit dollar-denominated gold by making the futures appear more expensive for buyers using other currencies. The two assets have an added link, as some investors buy gold as a hedge against declines in the U.S. dollar.
While gold prices may continue to suffer from worries about Europe, the market's declines could lead to increased physical buying, particularly from emerging-markets countries, HSBC analyst James Steel said in a note. Such buying has cushioned gold-price declines during the last year, analysts say. . .View Full Article