(Updates throughout; previous SINGAPORE)
* Gold near to wiping out 2012 gains
* Correlation with euro strengthens
* China car sales help palladium
* Coming up: U.S. March wholesale inventories; 1400 GMT
By Amanda Cooper
LONDON, May 9 (Reuters) – Gold fell for a third day on
Wednesday, touching a four-month low and all but wiping out its
gains for the year as the escalation in the euro zone debt
crisis prompted investors to favour dollars and German
government bonds as safe-havens.
Political disarray in Greece, a change in the French
presidency and renewed concern about the resilience of the
Spanish banking sector sent the euro to a 15-week low against
the dollar and propelled German bond futures to
record highs.
Spot gold was down 1.2 percent on the day at
$1,585.01 an ounce at 0940 GMT, having lost more than 3 percent
so far this week in its largest weekly slide since mid-March.
“It’s not as though the escalation of the political risk in
Europe is doing anything positive for gold prices at all and
this is totally different to how we were between 2008 and 2010,
when all the correlations were totally reversed and the
weakening of the euro actually led to a strengthening in the
gold price,” Natixis head of commodity research Nic Brown said.
“This very much suggests that we are not getting demand for
gold from European investors. The dymanic is purely from the
impact of the crisis on to the FX market and from that, directly
on to the gold price,” he said.
The gold price is on the verge of wiping out all the gains
for 2012 and shows a rise of just 1.4 percent, compared with a
year-to-date gain of as much as 14 percent in late February.
This compares with an 8.4 percent advance in the S&P; 500
and gains of nearly 10 percent and nearly 6.5 percent in
Chinese equities and crude oil respectively in
2012.
FEARS GROW IN EUROPE
In Europe, radical leftist Alexis Tsipras was to meet the
leaders of Greece’s mainstream parties on Wednesday to try to
form a coalition government, after demanding they first agree to
tear up the country’s EU/IMF bailout deal.
In Spain, Madrid will demand banks set aside another 35
billion euros ($45 billion) against loans to builders, financial
sources said, as it battles to rebuild confidence in a sector
where huge losses have raised fears the country may need an
international bailout.
Nervousness over the worsening situation in Spain sent
yields on the benchmark 10-year Obligacion beyond
the 6.00 percent threshold that many see as unsustainable in
terms of servicing the country’s debt burden, thereby further
undermining the euro.
The drag of the single European currency on the gold price
intensified on Wednesday.
Gold’s correlation to the euro, the frequency with which
these two assets move in tandem, strengthed to reach a one-week
high of +41 percent, meaning gold was more likely to mirror
movements in the euro than trade in the opposite direction.
Gold priced in euros fell by 1.1 percent on the
day to a four-month low of 1,220.07 euros an ounce.
“Gold seems to be pegged to the euro and this is not going
to rally in a hurry either. So all in all, I expect the market
to trend lower and would look for a trading range for the next
month of 1525-1650,” David Govett, head of precious metals at
Marex-Spectron, said.
“Long term, events will catch up with other markets and the
dollar will lose its temporary safe haven status and at that
point, gold will start to shine again. But for now, it is in the
doldrums and looks set to stay there for a while to come”.
In other precious metals, palladium outperformed gold
and silver following the release of data that showed robust
year-on-year growth in car sales in China, the world’s largest
auto market.
Palladium is used primarily in catalytic converters to
reduce climate-warming emissions, particularly in
gasoline-powered vehicles, for which China is the largest
consumer.
Car sales in China, the world’s largest auto market, grew
12.5 pct in April from a year earlier to 1.28 million units,
quickening from a 4.5 percent rise in March.
Spot palladium was on course for a seventh day of losses,
matching a seven-day string of daily losses in August 2010,
which in turn was the longest stretch of declines since
September 2008, when the global financial crisis escalated.
The price was last down 0.3 percent on the day at $613.20 an
ounce.
Silver touched its lowest level since the start of
the year. Spot silver was down 1.4 percent on the day at $28.84
an ounce, set for a weekly decline of 4.3 percent, the largest
in a month.
Platinum was down 0.1 percent at $1,501.44 an ounce.
(Editing by Keiron Henderson)
