MW: Gold off as dollar rises after elections in Europe
France elects new president; Greeks rebuke mainstream parties
By Polya Lesova, MarketWatch
NEW YORK (MarketWatch) — Gold futures dropped on Monday, as the U.S. dollar rose against major rivals after voters in France and Greece delivered a rebuke to parties supporting austerity measures.
Gold for June delivery GCM2 -0.44% fell $7.90 to $1,637.30 an ounce in electronic trading.
The losses for the metal came as the U.S. dollar index DXY +0.16% , which measures the performance of the greenback against a basket of other currencies, rose to 79.737 from 79.468 late Friday. Strength in the dollar tends to put pressure on dollar-denominated commodities because it makes them more expensive for holders of other currencies.
“A firmer U.S. dollar, which rose significantly against the euro in the wake of the elections in France and Greece at the weekend, is weighing on [the gold] price this morning,” Commerzbank analysts said in a note.
In France, voters ousted incumbent President Nicolas Sarkozy in favor of Socialist challenger Francois Hollande, while in neighboring Germany, Chancellor Angela Merkel’s coalition suffered defeat in a state election.
Merkel, working closely with Sarkozy, has been a strong proponent of austerity for the euro zone as a way out of the long-running debt crisis, while critics such as Hollande have emphasized the importance of boosting growth at a time when many European nations are sliding into recession. Read more about the election in France.
In southeastern Europe, many Greek voters backed fringe parties, rejecting the nation’s two major political parties, which had supported tough austerity measures. The election may result in political deadlock as disparate parties are unable to agree on forming a governing coalition.
Polya Lesova is MarketWatch's New York deputy bureau chief.
