Gold drops, dollar rises as Greek stalemate draws on

Investing.com - Gold prices fell in Asian trading on Monday as Greek political parties failed to agree on a coalition government over the weekend, stoking fears the country is growing closer to exiting the eurozone, which fueled demand for gold's traditional hedge, the U.S. dollar.

China's decision to cut reserve requirement on banks fueled demand for greenbacks as well, further softening the yellow metal.
 
On the Comex division of the New York Mercantile Exchange, gold futures for June delivery traded down 0.21% at USD1,580.65 a troy ounce.

Gold traded at a low of USD1,578.25 a troy ounce and hit a high of USD1,585.25 a troy ounce during the session.

The precious metal sought to test support at USD1,573.75 a troy ounce, the low of May 11, and resistance at USD1,593.25, the high on May 11.

China's decision to cut reserve requirements to spur growth fueled fears the Asian giant faces headwinds.

Meanwhile in Greece, political leaders continue negotiating terms to form a coalition government, although leftwing party Syriza has said it won't participate in the latest round of talks due its staunch opposition to austerity measures gripping the country's economy.

Greek political parties have expressed a desire to stick to the euro, but doubts of doing so continue to build after President Karolos Papoulias failed over the weekend to patch together a coalition.

Conservative political party New Democracy, left-wing Syriza, socialist PASOK and the smaller Democratic Left have been trying to create a coalition government after May 6 parliamentary elections, though talks have continuously broken down.

Greece has agreed to tough austerity measures in exchange for multilateral bailout assistance, although policies including layoffs, tax hikes and public spending cuts resulted in factional parliamentary results reflecting disenchantment with traditional support enjoyed by New Democracy and PASOK.

Failure to decide on a coalition government soon will force a second round of elections, seen by many as a tipping point towards a Greek exit from the eurozone.

Political restlessness in Greece coupled with Chinese monetary easing sent investors rushing the dollar in early Asian trading Monday, selling gold in the process.

Elsewhere on the Comex, silver for July delivery was down 0.29% and trading at USD28.805 a troy ounce, while copper for July delivery was up 0.81% and trading at USD3.659 a pound.