NEW YORK: Gold fell on Monday as bullion investors cashed in some of the previous session's sharp gains to cover losses in US equities, which came under pressure from signs of a US economic slowdown and Europe's debt crisis.
The metal, which rallied 4.3 percent on Friday, took a hit from renewed selling on Wall Street as financial markets focused on Tuesday's emergency talks among Group of Seven finance chiefs to discuss the euro zone's woes.
Bullion broke its trend of trading in sync with riskier assets last week with a 3.5 percent rise, after Friday's surprisingly weak US payrolls report stoked talk that further stimulus measures may be necessary to reignite growth.
But the metal has so far this year failed to draw sustained safe-haven bids despite the turmoil in Europe and signs of economic slowdown in the United States and China.
"Right now the tools to deal with the European crisis and the US economy are limited and questionable," said Jeffrey Sica, chief investment officer at SICA Wealth Management LLC, which has $1 billion in assets.
"So that puts the financial market in a very vulnerable position and enhances the desire to accumulate safe-haven-type investments" such as gold, Sica said.
Spot gold was down 0.7 percent at $1,614.89 an ounce by 2:21 p.m. EDT (1821 GMT).
US COMEX gold futures for August delivery settled down $8.20 at $1,613.90 an ounce, with volume sharply below its 30-day average and the previous session's turnover.
COMEX's gold open interest on Friday climbed more than 2 percent, suggesting the rally was boosted by new bullish bets by funds and money managers rather than short-covering, traders said.
Technical support should underpin gold as the metal formed a clear double bottom on daily charts after it posted a bullish outside week last week, CitiFX strategists said in a note.
US BOND YIELDS EYED
Extremely low returns on perceived safe havens such as US and German bonds are also helping gold.
"Low US and German bond yields leave investors with few quality assets to choose from and may benefit gold," said James Steel, chief commodities analyst at HSBC.
Steel said gold prices appeared to have broken away from their close correlation to US Treasury bonds, a trend the two had shown earlier this year.
US 10-year Treasury bond yields, which move in the opposite direction to bond prices, were driven to a record low below 1.5 percent on F riday after the payrolls data. Yields rose from historic lows on Mo nday.
Among other precious metals, silver was down 1.7 percent at $28.16 an ounce. Spot platinum fell 1.2 percent to $1,424.25 an ounce, while spot palladium edged up 0.2 percent at $609.76 an ounce.
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