Gold drops 6% in May on Europe's woes

Gold futures fell in New York, capping the longest monthly slump since 2000, as Europe's worsening debt crisis and signs of a U.S. economic slowdown crimped demand for the precious metal. Higher borrowing costs in Spain are putting pressure on Mariano Rajoy's five month-old government to join Greece, Portugal and Ireland in seeking a rescue that would be the European Union's biggest. First-time claims for U.S. jobless benefits rose by 10,000 to 383,000 last week, the Labor Department reported today. The Standard & Poor's GSCI index of 24 raw materials fell as much as 1.5 percent and was headed for its biggest monthly drop since the recession in October 2008. “Gold is behaving like a classic commodity and declining along with the pack,” Adam Klopfenstein, a market strategist at Archer Financial Services Inc. in Chicago, said in a telephone interview. “It's like the dead man walking.” Gold futures for August delivery retreated 0.1 percent to settle at $1,564.20 an ounce at 2 p.m. on the Comex in New York. The precious metal retreated 6 percent this month, the biggest drop this year as the dollar rallied 5.4 percent. Holdings in the bullion-backed exchange-traded products are set for a third monthly decline, data compiled by Bloomberg show. “Investors don't have the same strategic approach to gold as before,” Edel Tully, an analyst at UBS AG, said in a report today. “Much of the exposure to gold has been on an intra-day bias of late. The market is too highly correlated with risk for many participants' liking.” Silver futures for July delivery fell 0.8 percent to $27.757 an ounce on the Comex, extending the month's loss to 11 percent. The metal's third monthly loss is the longest slump since 2008. On the New York Mercantile Exchange, platinum futures for July delivery jumped 1.2 percent to $1,417.60 an ounce, helping narrow the month's loss to 9.8 percent. Palladium futures for September delivery rose 1.2 percent to $613.90 an ounce. Still, prices fell 10 percent in May, the biggest monthly drop since September. --Bloomberg News--