Gold poised for worst monthly run in 11 years on European crisis

May 31 (Bloomberg) -- Gold is poised for the worst run of monthly losses in more than 11 years in New York as concern that Europe’s fiscal crisis is escalating drove investors to seek the dollar as a haven over the precious metal.

Italy’s Prime Minister Mario Monti and Ignazio Visco, its central bank chief, pressed Germany to back more aggressive efforts to halt the escalating debt crisis, setting up a south- north showdown over how to stabilize the 17-nation euro economy. Bullion is 6.1 percent lower in May for its biggest drop this year as the dollar rallied 5.1 percent against a six-currency basket including the euro.

“Though our long-term expectations for the gold price remain very positive, we believe there may still be downside risks if the U.S. dollar continues to remain strong,” said Daniel Briesemann, an analyst at Commerzbank AG in Frankfurt.

August-delivery bullion fell 0.2 percent to $1,562.60 an ounce by 8:05 a.m. on the Comex in New York. The metal was down 0.3 percent this year. Spot gold fell 0.1 percent to $1,561.80 an ounce in London.

A fourth monthly decline would be the metal’s longest run of losses since the period to October 2000. Holdings in the SPDR Gold Trust, the biggest bullion-backed exchange-traded fund, are set for a third monthly decline, according to data on the company’s website.

“Investors don’t have the same strategic approach to gold as before,” Edel Tully, an analyst at UBS AG, said in a report today. “Much of the exposure to gold has been on an intra-day bias of late. The market is too highly correlated with risk for many participants’ liking.”

Demand for gold and jewelry in India, the world’s biggest bullion importer, may drop after the rupee fell to a record-low, boosting local prices, and amid slowing economic growth, according to Rajesh Exports Ltd. The currency slumped 20 percent in the past year while India’s economy expanded at the weakest pace in at least eight years last quarter.

Platinum and palladium futures gained in New York and silver declined.

Bloomberg News

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