Gold fell sharply Monday, in part as the euro weakened and the dollar gained amid German political turmoil that left Chancellor Angela Merkel’s prospects of serving a fourth term in doubt.
December gold GCZ7, +0.24% fell $21.20, or 1.6%, to finish at $1,275.40 an ounce. The exchange-traded SPDR Gold Trust GLD, -1.26% was off 1.3%, after it notched a weekly climb of 1.5% on Friday.
The metal extended its decline as the euro EURUSD, +0.0852% slumped after Merkel on Monday said she would prefer new elections to attempting to form a minority government after talks to form a majority coalition collapsed late Sunday.
The euro slumped back toward its low of the day after the remarks, with the ICE U.S. U.S. Dollar Index DXY, -0.04% rising 0.4%. A stronger dollar can dent demand for commodities priced in the currency, including gold, as it makes them more expensive to users of other currencies.
Gold had previously found support after the collapse of the coalition talks fueled a modest flight to quality that lifted other haven assets. But concerns were soon put on the back burner, with equities and other assets perceived as risky moving back into positive territory.
Some analysts said gold was due for short-term consolidation after rallying Friday to a more-than-one-month high. The metal tacked on nearly 1.8% last week, as the latest developments in the investigation into Russia’s interference in the U.S. presidential election raised concerns for the passage of potentially economy-boosting tax changes and knocked the dollar lower.
“Friday’s move has definitely improved gold’s chart patterns, but it remains to be seen if this will be enough to attract fresh fund-buying going into next week,” said Edward Meir, an independent commodity consultant at INTL FCStone, in a recent note. “Much of this will depend on the progress (or lack thereof) that the U.S. tax bill makes in the Senate.”
December silver SIZ7, +0.49% dropped 53 cents, or 3.1%, to $16.84 an ounce, after gaining about 3% last week. The exchange-traded iShares Silver Trust SLV, +0.31% fell 2.1%.
December copper HGZ7, -0.13% rose 0.8% to around $3.09 a pound. January platinum PLF8, +0.60% shed 3.4% to $923.60 an ounce and December palladiumPAZ7, +0.07% lost 0.7% to $986.10 an ounce.