--Comex June gold recently down 1.8% at $1,610.10 a troy ounce
--Euro-zone worries prop up dollar as Greece struggles to form government
By Matt Day
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Gold futures slumped Tuesday, touching the lowest levels in five months as worries about Europe's financial system sent investors looking for safety into the U.S. dollar, limiting demand for precious metals as a hedge against declines in the currency.
Greek political parties Monday failed in their first effort to form a coalition government after the country's election over the weekend, renewing fears political gridlock could help push the country toward a default or exit from the euro-zone. Other investors were worried about potential tension between Germany and France, two euro-zone political heavyweights, after the challenger's victory in France's presidential election.
Gold futures have generally pointed lower in recent months when euro-zone debt worries were front and center, as worried investors chose the U.S. dollar as a safe place to park cash. A rising dollar makes dollar-denominated gold futures appear more expensive for potential buyers using other currencies. The precious metal is also widely used as a hedge against weakness in the dollar.
The most actively traded gold contract, for June delivery, recently traded down $29, or 1.8%, at $1,610.10 a troy ounce on the Comex division of the New York Mercantile Exchange. Futures fell as low as $1,607.80 a troy ounce, the lowest intraday price since Jan. 5.
Greece's struggles to form a government are raising concerns that "Greece may default on its debt as early as next month," said Steve Scacalossi, a vice president with TD Securities, in a note. "The weekly charts for gold and silver look menacing," he said, arguing that for traders who place bets based on patterns in trading activity, the markets' momentum has turned negative.
Silver for July delivery fell 2.1% to $29.48. Futures earlier touched the lowest level since Jan. 9.
The U.S. dollar gained against the euro Tuesday, recently trading at $1.3007, from $1.3052 late Monday in New York.
-By Matt Day, Dow Jones Newswires; 212-416-4986; matt.day@dowjones.com
