Gold 1559.90, Silver 28.34 Falls on Greece Fears, Strong Dollar May 14, 2012 By Tatyana Shumsky Of DOW JONES NEWSWIRES
-- Comex June gold down 1.4% at $1,561.50/oz -- Greece failure to form a government over the weekend fans fears about default -- Investors are adding to bearish bets on gold, looking to profit from falling prices
NEW YORK (Dow Jones)--Gold futures fell Monday on concerns that Greek voters would need to return to the polls in June and pressure from a stronger dollar.
The most actively traded contract, for June delivery, was recently down $22.50, or 1.4%, to trade at $1,561.50 a troy ounce on the Comex division of the New York Mercantile Exchange.
Greece's political turmoil intensified as the radical left Syriza party said it would not form a coalition government with parties that support the budget cuts and austerity measures promised in exchange for the second sovereign debt bailout. Investors worry that the Mediterranean country will need to hold another election next month or face a default.
"The failure by parliament to create a coalition government over the weekend" raised "the chances of a "Grexit" in the coming months," traders at TD Securities said in a note.
The euro fell against the dollar on concerns about Greece, further pressuring gold futures. Gold is denominated in dollars and appears more expensive to investors using other currencies when the greenback rallies.
Moreover, investors are increasingly showing a lack of fear when it comes to placing bets that profit from falling gold prices or 'shorting' gold. Speculative investors like managed funds cut their bullish bets on gold to the lowest level since 2008 last Tuesday, according to weekly data from the Commodity Futures Trading Commission released Friday.
"What is more disconcerting is that while investors have over the past few weeks appeared cautious of running too short on gold, this fear seems to have evaporated," says Standard Bank analyst Marc Ground.
Elsewhere, Germany's Federal Court of Audit is set to inform the nation's parliament of its objections to the way the central bank measures its 3.396 metric tons of gold reserves. Experts estimate that only 5% of those reserves are stored in Frankfurt and Mainz, while almost two-thirds are in New York, more than 20% are in London and about 8% are in Paris.
The Court will most likely provide a summary report, which will request that the Bundesbank check whether the gold it has stored abroad is still there.
German commentators have long called for those gold reserves to be returned to Germany. Critics complain that Bundesbank representatives haven't checked whether the gold is still there since 2007.
-By Tatyana Shumsky, Dow Jones Newswires; 212-416-3095; tatyana.shumsky@dowjones.com
--Hans Bentzien in Frankfurt contributed to this article. (END) Dow Jones Newswires 05-14-12 0944ET
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