Gold prices fell to four-month lows Friday as worries over the financial health of Greece and Spain and huge trading losses for JPMorgan hurt stock markets and the euro, prompting investors to seek refuge in the dollar. Investors liquidated gold holdings to cover losses on other markets, analysts said, as a rise in risk aversion sparked selling across assets seen as higher risk, while lifting the US currency and safe-haven German Bunds. Gold set a fresh 2012 low Friday as investor demand for the dollar and mild US inflation left less interest in the precious metal as an alternative asset. The most actively traded gold contract, for June delivery, fell $11.50, or 0.7 percent, to settle at $1,584 a troy ounce on the Comex division of the New York Mercantile Exchange, the lowest settlement since Dec. 30. Gold fell 3.7 percent on the week, and has retreated in eight of the last 10 trading sessions, as worries about Europe's debt crisis sent investors seeking safety into the US dollar. Some investors buy gold as a hedge against a weakening dollar, and the currency's recent rally has bashed precious metals. The ICE US Dollar Index on Friday touched its highest point since mid-March. Gold's losses Friday also came as a reading on US inflation came in at its lowest level in more than two years in April, limiting demand for the metal as a hedge against rising prices. A similar reading in China, on consumer prices, also fell during the month. “I don't see a lot of buying coming in” to the gold market, said Jimmy Tintle, market analyst with GreenKey Alternative Asset Services. “You don't see a lot of inflationary concerns.” Gold's declines this week began on euro-zone worries as political upheaval gripped the currency union after elections held last weekend. While gold can rise as investors seek a safe harbor from economic turmoil, the metal has recently traded in step with perceived risky assets when European debt worries were making headlines. Amid the chance of a European financial freeze, some have favored holding the flexibility of cash instead of precious metals futures. “There are naturally quite a number of questions surrounding the yellow metal's near- and medium-term fate,” Kitco Metals analyst Jon Nadler said in a note. “There is little in the way of chart support for gold until the $1,527 level is touched and such an excursion could take place in short order.” "The markets are not happy at all," Afshin Nabavi, head of trading at MKS Finance, said. "(Gold) still feels a bit top heavy. With this move down, physical demand is not all that great. It feels like it may test the lower side around 1550 first, before bouncing back up again." "May is turning into a trouble month for investors in most asset classes once again. Gold, offering high liquidity, is being hurt by the need to realize cash and move to the sidelines," Saxo Bank vice president Ole Hansen said. "We are moving into an area of support with many talking about 1,550 as the line in the sand. The dollar should by now have been a lot stronger considering the strong buy signal given this week in the EUR/USD.”
