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Gold fell Monday in midday trading as investors decided to diversify their safe-haven options by increasing their holdings of U.S. Treasuries, the dollar and the Japanese yen, said George Cocalis, senior market strategist for PFGBEST.
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The drive to diversity safe-haven holdings stemmed from a sense that a Greek national debt default is imminent, with the euro about to suffer severe damage.
That sense grew over the weekend. Over the weekend, European Union finance ministers met but achieved no agreement on how to deal with a Greek default.
U.S. Treasury Secretary Timothy Geithner urged the ministers to enlarge the continent's $607 billion bailout fund, but to no avail. Geithner and others worry that the European Financial Stability Facility, which next month begins buying the bonds of weak eurozone nations like Spain and Portugal, won't have enough money to keep interest rates on those bonds from rising.
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Gold on the New York futures exchange dropped 1.65 percent to $1,784.70. Earlier in the session it was down more than 2 percent.
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Cocalis also said that gold may be down because of nervousness about recent volatility in gold's price.
"It looks like the play right now is the dollar more than gold, but there's been no technical damage to gold," Cocalis said. "Gold is moving sideways, basically."
The U.S. dollar was up about 1.4 percent against the euro.
Meanwhile, primary bond dealers were stockpiling Treasuries at the fastest pace since 2007 on speculation the U.S. central bank will announce its intention to buy longer-term debt to energize the U.S. economy, according to Bloomberg.
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