Gold Tumbles Into Bear Market on Greece Euro-Exit

Gold Tumbles Into Bear Market on Greece Euro-Exit Concern (Update 3)
By Phoebe Sedgman and Nicholas Larkin - May 16, 2012 5:12 AM GMT-0400





Gold declined for a fourth day in London and entered a so-called bear market as concern Greece will have to leave the euro boosted the dollar and cut the metal’s appeal as an alternative asset.

The U.S. Dollar Index, a measure against six major counterparts, rose a 13th day to a four-month high after Greece’s political leaders failed to form a ruling coalition. Bullion slid as much as 21 percent from its intraday record in September, the common definition of a bear market. On a closing basis, the metal needs to settle at $1,520.18 an ounce to record a 20 percent drop from its September peak.
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Gold ingots are arranged for a photograph at the Korea Gold Exchange headquarters in Seoul, South Korea. Photographer: SeongJoon Cho/Bloomberg



May 16 (Bloomberg) -- Peter Hickson of UBS talks about commodities. He speaks in Hong Kong with John Dawson on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)


“It’s a risk-off environment,” Peter Hickson, head of commodities research at UBS AG, said in a Bloomberg Television interview in Hong Kong. “People are concerned about liquidity and they’re going to take security in the U.S. dollar.”

Bullion for immediate delivery fell as much as 1.1 percent to $1,526.97, the lowest price since Dec. 29, and was at $1,534.60 by 9:50 a.m. in London. The metal erased its gains for the year this week. June-delivery futures were 1.4 percent lower at $1,535.40 on the Comex in New York.

Gold rose the previous 11 years and reached an all-time high of $1,921.15 in September. Holdings in bullion-backed exchange-traded products fell 3.1 metric tons to 2,379.4 tons yesterday, about 1.3 percent below the March 13 record, data compiled by Bloomberg show. Investor George Soros increased his holdings in the SPDR Gold Trust, the biggest gold-backed ETP, in the first quarter, while billionaire John Paulson maintained his stake, filings showed yesterday.
New Elections

New elections in Greece may be scheduled as early as June 10 after President Karolos Papoulias failed to broker a governing coalition in meetings yesterday with Pasok party head Evangelos Venizelos and other political leaders. The new ballot will follow an inconclusive May 6 vote that produced no clear majority. The deadlock has sparked uncertainty over Greece’s pledged spending cuts required by the terms of its two bailouts.

“At some stage we will have a recovery, but it will be euro-led and that for the time being seems to be a long way away, given all the problems of the euro zone,” David Govett, head of precious metals at Marex Spectron Group in London, wrote today in a report.

Gold’s 14-day relative-strength index is at 21.2. A level of 30 indicates to some analysts who study such charts that a rebound may be due.

Silver for immediate delivery fell 1 percent to $27.44 an ounce, after sliding to $27.2075, the lowest price since Dec. 29. It’s down for an eighth day, the worst run since September 2008. Palladium declined 0.4 percent to $593.50 an ounce. It reached $589.25, the lowest level since Nov. 30.

Platinum fell 0.2 percent to $1,429.90 an ounce. It slipped to $1,422.50 today, the lowest level since Jan. 10, and is the best performing precious metal this year with a gain of 2 percent.

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