The gold spot price fell to a four-month low of $1,596 on Tuesday after the dollar strengthened significantly against the euro and other leading currencies.
While the single currency has been resilient in the face of the ongoing eurozone crisis, signs of strain - sparked by the growing belief among investors that Greece will now be forced to exit the euro - are finally having an impact.
The euro was down 0.5% at $1.2986 yesterday, while the US dollar also strengthened against other currencies, including the pound, after Greece's ministers failed to agree a new coalition.
The new fear among investors is anti-austerity groups will play a part in any coalition government, resulting in Greece reneging on plans to cut its deficit and leading to its eventual withdrawal from the euro.
The move against the euro has been a long time coming, but it fed through to gold prices yesterday, as dollar strength took the price of the precious metal down below $1,600 for the first time in over four months.
Gold fell to $1,596, down 2.6% on the day, with the sell-off taking the precious metal to its lowest level since 2 January when it was at $1,565.
The metal was trading at $1,593 shortly before the start of European trading on Wednesday morning. It has fallen sharply since the height of the crisis last year, when it traded above $1,900.
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