Gold drops as investors turn to dollar

Gold declined for a fourth day in London and entered a so-called bear market as concern Greece will have to leave the euro boosted the dollar and cut the metal's appeal as an alternative asset.

The US Dollar Index, a measure against six major counterparts, rose a 13th day to a four-month high after Greece's political leaders failed to form a ruling coalition. Bullion slid as much as 21 percent from its intraday record in September, the common definition of a bear market. On a closing basis, the metal needs to settle at $1,520.18 an ounce to record a 20 percent drop from its September peak.

"It's a risk-off environment," Peter Hickson, head of commodities research at UBS AG, said in Hong Kong. "People are concerned about liquidity and they're going to take security in the US dollar."

Bullion for immediate delivery fell as much as 1.1 percent to $1,526.97, the lowest price since Dec 29. The metal erased its gains for the year this week. June-delivery futures were 1.4 percent lower at $1,535.40 on the Comex in New York.

Gold rose the previous 11 years and reached an all-time high of $1,921.15 in September. Holdings in bullion-backed exchange-traded products fell 3.1 metric tons to 2,379.4 tons on Tuesday, about 1.3 percent below the March 13 record, data compiled by Bloomberg show. Investor George Soros increased his holdings in the SPDR Gold Trust, the biggest gold-backed exchange-traded product, in the first quarter, while billionaire John Paulson maintained his stake, filings showed on Tuesday.

New elections

New elections in Greece may be scheduled as early as June 10 after President Karolos Papoulias failed to broker a governing coalition in meetings on Tuesday with Pasok party head Evangelos Venizelos and other political leaders. The new ballot will follow an inconclusive May 6 vote that produced no clear majority. The deadlock has sparked uncertainty over Greece's pledged spending cuts required by the terms of its two bailouts.

"At some stage we will have a recovery, but it will be euro-led and that for the time being seems to be a long way away, given all the problems of the eurozone," David Govett, head of precious metals at Marex Spectron Group, wrote on Wednesday in a report.

The price of silver for immediate delivery fell 1 percent to $27.44 an ounce, after sliding to $27.2075, the lowest price since Dec 29. It's down for an eighth day, the worst run since September 2008.

The price of platinum fell 0.2 percent to $1,429.90 an ounce. It slipped to $1,422.50 on Wednesday, the lowest level since Jan 10, and is the best performing precious metal this year with a gain of 2 percent.