By Claudia Assis and Barbara Kollmeyer, MarketWatch
SAN FRANCISCO (MarketWatch) — Gold fell Monday on worrying political developments in the euro zone and data from China showing continued contraction for the country’s manufacturing sector.
Gold for June delivery GCM2 -0.72% fell $13.80, or 0.8%, to $1,629.20 an ounce on the Comex division of the New York Mercantile Exchange.
The metal settled marginally higher Friday at $1,642.80 an ounce but ended the week down 1%.
Investors worried about increased political risk in Europe after the Socialist Party candidate for the French presidential election, François Hollande, took a narrow lead in the first round of the country’s election.
Hollande and incumbent Nicolas Sarkozy will face off in a second-round election May 6.
Far-right candidate Marine Le Pen finished a surprise third.
Adding to that, the Netherlands is facing an early election as Dutch Prime Minister Mark Rutte is due to resign Monday after the weekend collapse of budget talks. The right-wing Freedom Party walked out of budget negotiations calling for extra budget cuts, and strategists are worried Holland's triple-A credit rating could be under threat.
From China, a preliminary reading of a gauge of business activity also worried investors. The HSBC Chinese manufacturing Purchasing Managers’ Index rose to a two-month high of 49.1, but readings below 50 indicate a contraction rather than an expansion.
U.S. stocks opened lower and promptly got hammered Monday, with the Dow Jones Industrial Average DJIA -1.02% recently off 164 points, or 1.2%, to $12,865.
Oil futures were off 1.8%. Gold has tended to track U.S. stocks and other commodities such as oil, forgoing its role as a safe-haven asset. U.S. bonds and the dollar have often taken the safety mantle.
The dollar index DXY +0.51% Monday jumped to 79.626 from 79.140 in late North American trading on Friday. A stronger dollar is detrimental to gold and other commodities as it makes them more expensive for holders of other currencies.
Meanwhile, May silver SIK2 -3.19% fell $1.07, or 3.4%, to $30.57 an ounce, and most metals futures were seeing red.
Copper for May delivery HGK2 -2.16% fell 9 cents, or 2.3%, to $3.61 per pound. China is a top consumer of copper and other base and precious metals.
July platinum PLN2 -1.72% lost $27.10, or 1.7%, to $1,557.10 an ounce.
Sister metal palladium for June delivery PAM2 -1.34% dropped $10.05, or 1.5%, to $666.85 an ounce.
Claudia Assis is a San Francisco-based reporter for MarketWatch.
Barbara Kollmeyer is an editor for MarketWatch in Madrid.
