* Euro recovers from 4-yr lows to jump more than 1 pct
* Stock markets fall in Europe, United States
* Platinum, palladium tumble to 7-week lows
(Updates prices, adds comment, detail)
By Jan Harvey
LONDON, May 19 (Reuters) - Gold fell on Wednesday, with
early losses extended unusually in tandem with the euro's rally
from 4-year lows, and as investors used profits from bullion to
cover losses on other markets.
Volatility in the single currency ramped up on talk that
Greece was considering leaving the EU, but Greece categorically
denied the market rumours. [] []
Bullion prices weakened as the traditionally strong inverse
correlation between the euro/dollar rate and the metal has
broken down in recent months, with investors having sought the
metal out as a refuge from euro zone sovereign debt concerns.
Analysts also cited the metal's failure to hold key support
at $1,200 per ounce after a recent surge to record highs.
Spot gold <XAU=> hit a low of $1,192.57 an ounce and was bid
at $1,195.75 an ounce at 1508 GMT, against $1,219.70 late in New
York on Tuesday.
The metal, which is traditionally seen as a safe store of
value in times of volatility, has been caught in broad-based
selling of other assets such as stocks and commodities.
"What is the use of an insurance policy if you can't cash it
in at some point?" said Daniel Major, an analyst at RBS Global
Banking & Markets.
"The reason why people might hold a percentage of their
portfolio in gold is because it is generally uncorrelated to
other assets, and people could easily be selling it down to
cover margin calls in many other asset classes."
U.S. stocks dropped on Wednesday, while European equities
sank 2.4 percent by midday, losing ground for the third time in
four sessions. []
Oil prices were down below $69 a barrel, while copper and
aluminium fell more than 2 percent. [] []
U.S. gold futures for June delivery <GCM0> on the COMEX
division of the New York Mercantile Exchange fell $19.10 to
$1,195.50 an ounce.
INVESTMENT FIRM
Investment in gold stood firm, with holdings of the world's
largest gold-backed exchange-traded fund, New York's SPDR Gold
Trust <GLD>, steady at a record 1,217.108 tonnes on Tuesday.
Holdings of gold-backed exchange-traded commodities operated
by London's ETF Securities have risen nearly 700,000 ounces or 9
percent so far this month to 8.437 million ounces.
The yellow metal's recent high prices may tempt some sellers
into the market, however.
"We have to put the gold falls in perspective," said
Citigroup analyst David Thurtell. "The price is still very high
in historical terms. Consumers are rebelling at the higher
prices and scrap supply is rising."
"Japanese investors have been sitting on gold investments
for decades waiting for a surge like this to liquidate."
Other precious metals also declined, with silver <XAG=> bid
at $18.20 an ounce against $18.90, and platinum <XPT=> sliding
more than 4 percent to a seven-week low at $1,595.50. It was
later at $1,603.50 an ounce against $1,666.50.
Palladium <XPD=> was the biggest faller, slipping as much as
8 percent to a seven-week low of $454.88, as traders reported
fund selling of the metal and risk aversion rose. The metal
climbed to a two-year high of $570.50 last month.
"The price increase has been mainly due to speculation...
and these levels may not be sustainable in the long run unless
the investors have a longer view," said one trader.
Palladium was later at $460.98 against $495. Silver,
platinum and palladium are more industrial in use than gold, and
are therefore most exposed to weakness in economic activity.
(Editing by Keiron Henderson)
