US MIDDAY: gold down two percent

Gold lost its appeal as a safe haven on Monday, falling over 2 percent as fears of a Greek debt default and larger eurozone problems drove investors into bonds and the dollar. A meeting of European officials to tackle the region's debt crisis ended without a solution, stoking fears of a possible Greek default. Investors got out of risky trades and took refuge in US Treasuries and the dollar.
The cancellation of a visit by Greek Prime Minister George Papandreou to the United States to chair an emergency cabinet meeting at home, and a regional election defeat for German Chancellor Angela Merkel, added to perceptions of a worsening crisis. Gold, which hit record highs above $1,920 an ounce just two weeks ago, fell below the psychological level of $1,800. Some fund managers and analysts were thinking prices may need to dip to below $1,700 for the market to rally again. "What's different about the eurozone crisis this time is people are moving straight to cash instead of looking at alternative safe assets like gold," said David Meger, metals trading director at Chiago's Vision Financial Markets.
"Also, there's a contingent out there that feels that gold has gone up too fast, too soon, and that it needs to correct more to bring back that real strong support or value buying or bargain hunting." Uncertainties over what a two-day policy meeting of the Federal Reserve from Tuesday would yield has also put gold in a wait-and-see mode, said James Dailey, a portfolio manager who helps manage $220 million for TEAM Financial Asset Management in Harrisburg, Pennsylvania.
"Depending on what the Fed says or does, things could change pretty quickly for gold," Dailey said. There is broad consensus that the US central bank will further ease monetary policy at the two-day meeting, although analysis said that may not necessarily weaken the dollar.
At 1:15 pm EDT (1715 GMT), spot gold, which tracks trades in bullion, was at $1,770 an ounce, an ounce versus Friday's late trade of $1,810.84 in New York. It briefly broke below $1,770 during the session. US gold futures for December was at $,776 an ounce, versus Friday's settlement of $1,814.70. "I would say $1,700 would probably be the level which I'd expect value buyers to come in. The next leg lower would be $1,660, which should put a bottom to the market's correction," said Dailey at TEAM Financial.