Gold fell almost 1 percent on Friday as fears over a worsening European debt crisis and sharp losses in equities and commodities sent the precious metal to its biggest weekly decline this year.
The metal came under heavy pressure as disclosures of huge trading losses at JPMorgan Chase & Co, a major bullion trader, dented sentiment among gold investors. Sharp losses in crude oil and copper also offset surprisingly robust US consumer confidence data.
Political uncertainty in Greece and a change of leadership in France this week had investors doubting whether Europe would come through with the billions of euros needed to bail out its troubled economies. Spanish bank worries also added to debt fears.
“Everybody's looking in Europe trying to figure out what's going on there, so you are not getting a tremendous amount of interest in any asset class,” said Anthony Neglia, president of Tower Trading and a COMEX gold options floor trader.
Spot gold fell 0.8 percent to $1,5780.25 an ounce by 2:37 p.m. EDT (20:37 SA time), having earlier hit a low of $1,574.29,
its weakest since Jan. 3.
For the week, gold notched a 3.7 percent loss, the worst performance since the week of Dec. 18 last year when it tumbled nearly 7 percent.
US gold futures for June delivery settled down $11.50 at $1,584 an ounce. Trading volume rose above its 30-day average for a fourth session, preliminary Reuters data showed.
Neglia said that there was a lack of aggressive buying of put options to hedge against downside risk despite gold's heavy losses this week.
Although last year gold tended to benefit from worries over the health of the euro zone, it has reverted to trading more in line with assets seen as higher risk as the US dollar and US government bonds have taken over as the havens of choice.
“May is turning into a trouble month for investors in most asset classes once again. Gold, offering high liquidity, is being hurt by the need to realize cash and move to the sidelines,” Saxo Bank vice president Ole Hansen said.
INDIAN PHYSICAL DEMAND SOFT
Buying of physical gold has been lackluster in recent weeks in major consumer India, where appetite has been dampened by rupee weakness, further eroding confidence in the metal.
Some buying was seen in the United States, where sales of American Eagle gold coins hit 31,500 ounces so far this month, already 50 percent more than was sold in the whole of April.
Silver was down 0.4 percent at $28.87 an ounce.
The gold/silver ratio, which measures the number of silver ounces needed to buy an ounce of gold, broke through 55 on Friday for the first time since mid-January as the white metal underperformed bullion.
Spot platinum dropped 1.2 percent to $1,462.25 an ounce, while spot palladium was down 2.4 percent at $595.63 an ounce after hitting a low of $595.28, its weakest price since mid-December.
Platinum Week, at which traders, miners, refiners, recyclers and buyers will meet, takes place in London next week. Recent price declines in both metals are likely to be discussed. - Reuters