Gold plunges from five-month high as dollar climbs

08:42, May 05, 2010      

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Gold futures on the COMEX Division of the New York Mercantile Exchange dropped sharply after hitting a five-month high on Tuesday as the increase in the value of dollar reduced gold's demand as an alternative assets. Silver and platinum witnessed the largest fall since February.

The most active gold contract for June delivery tumbled 14.1 U. S. dollars, or 1.2 percent, to finish at 1,169.2 dollars.

Investors continued to worry that the 110-billion-euro rescue package for Greece may not be able to solve the spreading debt crisis in eurozone, and other debt-laden European countries like Spain and Portugal may soon or later suffer a similar fiscal meltdown.

The negative outlook for financial health of Greece and some of its eurozone neighbors has heavily weighed on euro and sent it to reach the lowest point against dollar since April last year, and made dollar and gold the venue of choice on Tuesday for rise- averse investors. But the rally in dollar has greatly eroded the appeal of bullion as alternative investment. As a result, gold price plunged from 1,192.80 dollars per ounce, the highest level since Dec. 4, to settle at 1,169.20 dollars an ounce, with the biggest drop for a most-active contract since April 16.

July silver declined 99.8 cents, or 5.3 percent, to settle at 17.842 dollars per ounce. July platinum tumbled 43.1 dollars, or 2. 5 percent, to close at 1,685.8 dollars an ounce.



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