Gold Falls in New York as Traders Curb Risk Before EU Bank-Stress Report

Gold fell in New York for the first time in four days as traders reduced risk before the results of stress tests on 91 banks in Europe, where a financial crisis sparked a surge in bullion prices last month.

European Union regulators are examining the strength of banks to determine if they can survive potential losses on sovereign-bond holdings. Gold reached a record $1,266.50 an ounce on June 21, and last month rallied to all-time highs in euro, sterling and Swiss francs.

“There’s just caution on the part of traders,” said Frank Lesh, a trader at FuturePath Trading LLC in Chicago. “People aren’t sure how the markets are going to react, so rather than have a large position in gold, they’re paring back.”

Gold futures for August delivery dropped $2.80, or 0.2 percent, to $1,192.80 an ounce at 11:34 a.m. on the Comex in New York. Before today, gold rallied 9.1 percent this year.

Results of the bank stress test will be released at 6 p.m. in Brussels.

Gold’s losses may accelerate should equities decline after the announcement, because investors are likely to sell the metal to cover losses, Lesh said. Investors may also buy the metal as a haven, he said.

“If things turn out much worse than expected and the euro has a sharp decline, I’d go into gold,” Lesh said.

Silver futures for September delivery gained 9 cents, or 0.5 percent, to $18.21 an ounce on the Comex.

Platinum futures for October delivery rose $20.20, or 1.3 percent, to $1,549.60 an ounce on the New York Mercantile Exchange. Palladium futures for September delivery advanced $7.50, or 1.6 percent, to $464.40 an ounce.

To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.