Gold futures slumped Friday, erasing much of the week's gains, as worries about the health of the global economy and strength in the dollar pushed traders to pare their holdings of the precious metal. The most actively traded contract, for June delivery, fell $20.40, or 1.2 percent, to settle at $1,660.20 a troy ounce on the Comex division of the New York Mercantile Exchange. During the week, futures rose 2 percent. “One of the bigger risks to being long gold is if the risk-off trade returns,” said Dave Meger, director of metals trading with Vision Financial Markets, referring to bets on rising prices. Gold, he said, could see further losses if money managers start paring their holdings of commodities and equities in anticipation of a worsening of Europe's financial position. European and US stock markets fell Friday the view that Europe's debt crisis and worries about the pace of growth in China wouldn't disappear any time soon. Investors were rattled by the news that Spanish banks' borrowing from the European Central Bank nearly doubled in March from February, raising concerns about the supply of cash in the country's financial system. And in China, a reading on growth came in slower than economists were expecting, a potentially worrying sign from the world's second-largest economy, and a key gold buyer. Gross domestic product grew 8.1 percent during the first quarter from a year earlier, slower than the 8.9 percent recorded in the fourth quarter and expectations for a reading of 8.3 percent. The US dollar snapped higher in response as investors sought the perceived safe-haven currency, pushing down dollar-denominated gold by making the futures appear more expensive for buyers using other currencies. “Gold is struggling with the stronger dollar,” said Frank Lesh, a broker with FuturePath Trading. Silver, which sees more demand from industry than from investors, slid 3.5 percent to settle at $31.390 a troy ounce on the bleak economic sentiment Friday. Platinum and palladium, chiefly used by the auto industry, both fell about 1 percent. Gold futures had settled at their highest price in more than two weeks Thursday, buoyed by expectations that the Federal Reserve would hold to its accommodative monetary policies after comments in recent days from a pair of key leaders at the central bank. Such easy-money policies can send investors into gold and other precious metals as a hedge against the potential weakness they can bring to paper currencies. June gold last traded down $7.10 at $1,673.50 an ounce. Spot gold was last quoted down $3.10 an ounce at $1,672.75. May Comex silver last traded down $0.27 at $32.25 an ounce. A weaker-than-expected first-quarter gross domestic product report coming out of China overnight did put some selling pressure into the raw commodity sector. Some fresh, weak economic data coming out of the European Union overnight and rising bond yields in Spain and Italy this week have pressured the euro currency and bolstered the US dollar index, which is a bearish factor for gold and silver. Gold dipped over the week but not before a brief spike to two-week highs near $1,700 an ounce on dollar weakness. “Gold prices continue to take their cue from currency moves,” said Barclays Capital analyst Suki Cooper. A weaker dollar makes commodities priced in the US unit cheaper for buyers using rival currencies, lifting demand. Silver grew to $32.43 an ounce from $31.54. On the London Platinum and Palladium Market, platinum increased to $1,640 an ounce from $1,617. Palladium dipped to $651 an ounce from $658. Copper for delivery in three months grew to $8,454.25 a ton from $8,405 the previous week.
