NEW YORK (Reuters) - Gold slipped on Monday as Spain’s economic troubles fueled euro zone debt fears, but safe-haven bids pulled bullion off session lows, as it outperformed equities and other commodities.
Gold came under early pressure from tumbling U.S. equities and crude oil after Spain said it sank deeper into recession in the second quarter. Many investors worried the euro zone’s No. 4 economy was closer to seeking a full bailout.
Gold pared losses as the euro rebounded after the International Monetary Fund said it would start discussions with the Greek authorities on July 24 on how to bring Greece’s economic program back on track.
Last week, worries about a global economic slowdown and deflation sent bullion slumping toward $1,560 an ounce several times, but gold held above that level. The metal has been moving in a range between $1,527 and $1,655 in the past three months.
“When gold gets down to a certain range around $1,550-60, investors often consider it a safety play and an inexpensive hedge in their portfolios,” said Phillip Streible, senior commodities broker at futures brokerage R.J. O‘Brien.
“Plus, a lot of people think that weaker global cues are going to entice the Fed to embark on another quantitative easing plan, so gold’s downside is somewhat limited,” Streible said.
Spot gold was down 0.5 percent at $1,576.10 an ounce by 3:18 p.m. EDT (1918 GMT).
U.S. COMEX August gold futures settle down $5.40 at $1,577.40 an ounce, with trading volume in line with its 30-day average, preliminary Reuters data showed.
Bullion was dragged down by a more than 3 percent drop in Brent oil and a one-percent fall in the S&P 500 .SPX amid European economic worries. U.S. Treasury yields fell to new record lows. <US/>
European debt fears sent global markets lower after a second Spanish region requested help from the central government to keep it afloat, as media reported half a dozen local authorities were ready to follow in the footsteps of Valencia.
Investment buying and Indian and Chinese physical precious metals demand remained weak, analysts said.
Holdings of the world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust, dropped for a fourth consecutive week after a 2.4-tonne outflow on Friday. The 15-tonne decline marked its biggest weekly fall since late December.
Trade data from China, a major market for industrial precious metals, showed a 23.6 percent year-on-year drop in silver imports in June, a 29.6 fall in palladium imports, and a 31.8 percent rise in platinum inflows.
Physical gold demand was already under pressure as a near-record low in the Indian rupee makes gold more expensive for the country which is among the top consumers of bullion.
Among other precious metals, silver was down 1 percent at $27.03 an ounce, while platinum fell 1.3 percent to $1,392.70 an ounce and palladium dropped 0.4 percent to $568.72 an ounce.
Additional reporting by Jan Harvey in London; Editing by Dale Hudson and David Gregorio