* Gold falls for a fifth straight session; no safe haven
* Market volatility weighs as euro rallies from 4-yr lows
* Platinum, palladium tumble on weak economic sentiment
* Coming up: US weekly jobless claims, Philly Fed on Thur.
(Recasts, adds comments, updates prices, adds NEW YORK second byline)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, May 19 (Reuters) - Gold dropped below $1,190 an ounce
on Wednesday, as extreme volatility of the euro and losses in global equity
markets prompted profit taking after rallies to record highs last week.
The metal has fallen for a fifth straight session due to jittery
sentiment, as the euro soared on rumors of official actions, after the
single currency rebounded from a 4-year low versus the dollar earlier in
the session. []
Platinum group metals and silver tumbled on fund unwinding after recent
rallies and as a euro zone debt crisis hampered demand expectations for
industrial metals.
Questions about the viability of the euro and contagion fears about
Greece's debt crisis drove gold to a record $1,248.95 an ounce last week
and knocked other assets lower.
"When we hit all-time highs, everybody thought gold was going to shoot
straight up to the moon. Now, a lot of people decide to take their profits,
and the big banks just put in sell orders that hit the market," said COMEX
gold floor trader Dominick Cognata.
"I don't think the selling is over yet, I think we still have another
$20 on the downside."
COMEX open interest tumbled more than 20,000 to about 580,000 lots as
of Tuesday, but still held near a record high set on Monday, suggesting
rising volatility after a sharp rally to all-time highs, traders said.
<NYMMTLFUT/VOI>
Spot gold <XAU=> hit a low of $1,186.62 an ounce and was at $1,189.95
an ounce at 2:11 p.m. EDT (1811 GMT), against $1,219.70 late in New York on
Tuesday.
U.S. gold futures for June delivery <GCM0> on the COMEX division of the
NYMEX settled $21.50, or 1.8 percent, at $1,193.10 an ounce.
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.
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 about 3
percent, losing ground for the third time in four sessions. []
RESILIENT INVESTMENT DEMAND?
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 increased jewelry scrap
selling, however.
Other precious metals also declined sharply, with silver <XAG=> at
$18.14 an ounce against $18.90, and platinum <XPT=> sliding more than 4
percent to a seven-week low at $1,578.55. It was last at $1,596 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 last at $457.75 against $495. Silver <XAG=>, platinum and
palladium are more industrial in use than gold, and are therefore most
exposed to weaker economic sentiment.
Close Change Pct 2009 YTD
Chg Close % Chg
US gold <GCM0> 1193.10 -21.5 -1.8 1096.20 8.8
US silver <SIN0> 18.115 -0.764 -4.0 16.845 7.5
US platinum <PLN0> 1605.70 -84.80 -5.0 1471.00 9.2
US palladium <PAM0> 459.70 -47.30 -9.3 408.85 12.4
Prices at 2:22 p.m. EDT (1822 GMT)
Gold <XAU=> 1189.75 -29.95 -2.5 1096.35 8.5
Silver <XAG=> 18.12 -0.78 -4.1 16.84 7.6
Platinum <XPT=> 1595.50 -71.00 -4.3 1465.50 8.9
Palladium <XPD=> 457.75 -37.250 -7.5 405.50 12.9
Gold Fix <XAUFIX=> 1195.00 -14.50 -1.2 1104 8.2
Silver Fix <XAGFIX=> 18.53 -29.00 -1.5 16.99 9.1
Platinum Fix <XPTFIX=> 1612.00 20.00 1.2 1466 10.0
Palladium Fix<XPDFIX=> 472.00 3.00 0.6 402 17.4
(Reporting by Frank Tang and Jan Harvey)
