Gold Set to Fall on Concern Europe Crisis to Boost Dollar

Gold declined for the first time in three sessions amid signs that Europe’s crisis is intensifying.

Spanish and Italian borrowing costs rose at debt sales amid concern that a European Union summit this week will fail to solve the sovereign debt crisis. The precious metal has tumbled 5.8 percent this quarter, heading for the biggest such loss since 2004, as investors favored the dollar as a haven investment. The greenback was up 6.7 percent against the euro this quarter through yesterday.

“People are waiting on the sidelines to see what the next step will be in Europe,” Fain Shaffer, the president of Infinity Trading Corp. in Medford, Oregon, said in a telephone interview.

Gold futures for August delivery fell 0.8 percent to settle at $1,574.90 an ounce at 1:39 p.m. on the Comex in New York.

The metal is still up 0.5 percent this year after 11 consecutive annual increases. Holdings in gold-backed exchange- traded products increased 38.7 metric tons this month, the most since November, and are within 0.1 percent of the all-time high set in March, data compiled by Bloomberg show.

Russia’s bullion reserves climbed 15.5 tons to 911.3 tons last month, the highest since at least 1993, data on the International Monetary Fund’s website showed. Turkey, Ukraine and Kazakhstan also boosted holdings, the data show.

Silver futures for September delivery fell 1.8 percent to $27.103 an ounce on the Comex, extending this quarter’s drop to 17 percent.

On the New York Mercantile Exchange, platinum futures for October delivery dropped 0.9 percent to $1,430.30 an ounce. Palladium futures for September delivery slumped 2.2 percent to $593.70 an ounce, falling the most since May 23.

To contact the reporters on this story: Debarati Roy in New York at droy5@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net