Gold futures fell from a two-week high as the dollar’s rally curbed demand for the metal as an alternative asset.
The euro slumped against the greenback after Greek Prime Minister Lucas Papademos warned that his country may face economic collapse as soon as March, and France’s debt costs climbed. Gold’s correlation with the 17-nation currency is the highest since March 2010, data compiled by Bloomberg show.
“Concerns that the European crisis is worsening is taking the sheen off gold,” Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago, said in a telephone interview. “We could see gold trade weak short term.”
Gold futures for February delivery declined 0.3 percent to $1,607.70 an ounce at 10:19 a.m. on the Comex in New York. Earlier, the price reached $1,626.80, the highest for a most- active contract since Dec. 21, partly because of physical demand in Asia.
The metal climbed 4.7 percent in the previous three sessions. In the fourth quarter, futures dropped 3.4 percent, snapping a rally since the end of 2008.
“Euro weakness is putting pressure on gold,” said Ole Hansen, a vice president of trading advisory at Saxo Bank A/S in Copenhagen. “We are at the beginning of a new year, so traders are lacking strong conviction, leaving room for these markets to be volatile. Bullion still trades as a risky asset.”
Silver futures for March delivery fell 0.5 percent to $28.945 an ounce on the Comex. Yesterday, the metal slumped 1.6 percent.
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