Gold futures fell for the first time in four days after European regulators said seven of 91 banks failed a financial stress test, eroding the value of the euro against the US dollar.
The European Union said the seven banks can't survive potential losses on sovereign-bond holdings. The euro dropped as much as 0.8 per cent against the greenback, reducing demand for gold as an alternative to the US currency. Gold has fallen 6.2 per cent from a record $US1,266.50 an ounce on June 21.
``Gold is tentatively re-establishing its relationship to the dollar,'' said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. ``Gold is trying to track the euro.''
Gold futures for August delivery dropped $US7.80, or 0.7 per cent, to $US1,187.80 on the Comex in New York. The metal has climbed 8.4 per cent this year.
Gold traditionally has moved in tandem with the euro as an alternative to the US dollar. This year, some investors sold euros and purchased US dollars and gold amid Europe's fiscal woes.
``Some of the risk premium has come out of the market, and gold continues to struggle with the $US1,200 level,'' said Matt Zeman, a trader at LaSalle Futures Group in Chicago.
Silver futures for September delivery fell 1.9 cents, or 0.1 per cent, to $US18.101 an ounce. This week, silver gained 1.8 per cent while gold was little changed.
Platinum futures for October delivery rose $US13.40, or 0.9 per cent, to $US1,542.80 an ounce on the New York Mercantile Exchange, up 2 per cent this week.
Palladium futures for September delivery advanced $US9.85, or 2.2 per cent, to $US466.75 an ounce, up 4 per cent this week.
Bloomberg News
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