Gold Drops With Commodities On Concern Europe Crisis Escalating

Gold declined for the first time in three days, dropping with other commodities, on concern that a bailout of Spanish banks won’t stop the European debt crisis from spreading. Platinum and palladium fell.

Immediate-delivery gold lost as much as 0.5 percent to $1,588.68 an ounce and was at $1,591.80 at 1:54 p.m. in Singapore. The metal swung between gains and losses yesterday after Spain requested as much as 100 billion euros ($125 billion) of European funds, becoming the fourth euro member to seek a bailout since the crisis began almost three years ago in Greece.

Greek voters head to the polls on June 17 to decide whether to honor the country’s bailout and determine the currency bloc’s future. The euro remained lower versus the dollar after a three- day slide, helping fuel losses in oil and copper. U.S. Federal Reserve policy makers meet next week to review the recovery in the largest economy amid speculation they may add more stimulus.

“In the flight to safety, the dollar remains the haven of choice for now,” Xiang Nan, an analyst at CITICS Futures Co., a unit ofChina’s biggest listed brokerage, said by phone from Hangzhou. “Markets are nervous this week ahead of the Greek elections and Fed meeting.”

August-delivery bullion declined as much as 0.5 percent to $1,589.40 an ounce on the Comex in New York, and was at $1,592.50. Holdings in the SPDR Gold Trust, the biggest exchange-traded product backed by bullion, held at 1,274.79 metric tons yesterday, level since June 6 and the largest amount since May 21, the company’s website showed.

Fed Meeting

Cash gold last week capped its worst five-day period in a month after Fed Chairman Ben S. Bernanke held off detailing measures to boost the U.S. economy, ahead of the central bank’s two-day policy-setting meeting that starts on June 19.

Further easing by the Fed will “take the dollar lower and, as a corollary to that, we’d see gold and probably a whole host of commodity prices going higher,” Robert Sinche, global head of currency strategy at Royal Bank of Scotland Plc, said in a Bloomberg Television interview. “Monetary policy is the key.”

Federal Reserve Bank of Atlanta President Dennis Lockhart, who votes on the Federal Open Market Committee this year, said yesterday that he’s “not convinced at this moment that the circumstances quite yet call for additional action.” He praised the Spanish bailout as a positive step in Europe.

Spot silver fell as much as 0.7 percent to $28.365 an ounce, and traded at $28.5075. Cash platinum dropped as much as 1.4 percent to $1,424.50 an ounce, and was at $1,433.75. Palladium lost as much as 0.8 percent to $617 an ounce, and last traded at $619.68.