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

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July 23 (Bloomberg) -- 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.

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

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