REUTERS

LONDON

GOLD fell for a third day on Wednesday, touching a four-month low and all but wiping out its gains for 2012 as the escalation in the eurozone debt crisis prompted investors to favour dollars and German government bonds as safe havens.

Political disarray in Greece, a change in the French presidency and renewed concerns about the resilience of the Spanish banking sector sent the euro to a 15-week low against the dollar and propelled German bond futures to record highs.

Spot gold was down 1.2 percent on the day at $1,585.30 an ounce at 1145 GMT, having lost more than 3 percent so far this week in its largest weekly slide since mid-March.

“It’s not as though the escalation of the political risk in Europe is doing anything positive for gold prices at all, and this is totally different to how we were between 2008 and 2010, when all the correlations were totally reversed and the weakening of the euro actually led to a strengthening in the gold price,” Natixis head of commodity research Nic Brown said.

“This very much suggests that we are not getting demand for gold from European investors. The dynamic is purely from the impact of the crisis on to the FX market and from that directly on to the gold price,” he said.

The gold price is on the verge of wiping out all the gains for 2012, with the year-to-date gain reduced to 1.4 percent from as much as 14 percent in late February. This compares with an 8.4 percent advance in the S&P 500 and gains of nearly 10 percent in Chinese equities and nearly 6.5 percent in crude oil in 2012.